Hochtief Aktiengesellschaft · XETR:HOT
Hochtief Aktiengesellschaft — Hochtief — Investor Presentation (December 2003)
22 slides from Hochtief Aktiengesellschaft's investor presentation, Dec 4, 2003
Slide 1: HOCHTIEF Europe: Risk management, Financials
HOCHTIEF Europe Risk management, Financials Tomorrow Today Yesterday Dr. Burkhard Lohr 1
Slide 2: Yesterday: Key Figures 2001
Yesterday: Key Figures 2001 (EUR million) 2001 New Orders 2,122.1 Order backlog 2,437.3 Work done 2,471.5 Earnings before tax (EBT) -184.3 Return on work done -7.5% Return on equity -67.9% Cash Flow -79.9 Employees (total) 7 889 2
Slide 3: Status 2001 / Restructuring program
Status 2001 § Project losses: EUR 94m § Not enough certainty for planning § Overcapacity § Liquidity management lacking § Risk management inadequate Restructuring program 3
Slide 4: Risk Management at HOCHTIEF Europe
Risk Management at HOCHTIEF Europe Rosaria-Victoria Argentina 4
Slide 5: Project Phase Risks
Project Phase Risks Decision to Prepare Bid Past kick-in point for Contract central risk manage- ment Canvassing Phase Bid Preparation and Project Execution Phase Negotiation Phase Investment Project Risk Execution Risk 5
Slide 6: Tools of Operating Risk Management
Tools of Operating Risk Management Contract Review Committee Project Controlling Supply Management Controlling Bid Preparation and Canvassing Phase Project Execution Phase Negotiation Phase Bid Controlling Liquidity Controlling 6
Slide 7: Contract Review Committee (1) Basics
Contract Review Committee (1) Basics § 2 Executive Board members, 2 Divisional Managers, Head of QM § All projects over EUR 5m must be submitted for approval § Submission required for: Ÿ Prequalification/cost estimation Ÿ Bid preparation Ÿ Submission of a binding proposal Ÿ Contract award § Weekly m
Slide 8: Contract Review Committee (2) Main Decision Criteria
Contract Review Committee (2) Main Decision Criteria § Client § Type of project § Contract § Payment plan and security § Supply management § Joint venture partners § Staff deployed on the project Westfalenstadion Dortmund § Costing 8
Slide 9: Contract Review Committee (3) Two-year Review
Contract Review Committee (3) Two-year Review üNumber of projects: 1,586 üValue: EUR 30.9bn ü 26 applications turned down Client 14% Contract 33% ü Action required in Price 34% 1,594 instances Cash Flow 7% Other 12% 9
Slide 10: Bid Controlling
Bid Controlling § Detailed on-site appraisal of costing § Required for projects over EUR 10m § Or when required by Contract Review Committee § Reporting to entire executive management Oval Office Hamburg 10
Slide 11: Project Controlling
Project Controlling § Technical, contractual and commercial analysis of projects § For every project over EUR 5m: Ÿ Start-up audit (5% completion) Ÿ Execution audit (50% completion) Ÿ Acceptance audit (95% completion) § Reporting to entire executive management 11
Slide 12: Risk Management Aspects of Supply Management Controlling
Risk Management Aspects of Supply Management Controlling § Approval of subcontract awards: Ÿ EUR 5-10m: Divisional Manager Ÿ > EUR 10m: HTC Executive Board § Involvement of subcontractor management: Ÿ Facades and electrical/mechanical installations over EUR 5m Ÿ Demanding technical requirements Taiw
Slide 13: Risk Management Aspects of Liquidity Controlling
Risk Management Aspects of Liquidity Controlling § Project cash flow as early warning signal § Post-acceptance follow-up: Ÿ Final payment Ÿ Surrender of guarantee bonds Channel Tunnel Rail Link 13
Slide 14: Risk Management Tools: Interrelations
Risk Management Tools: Interrelations Management information Executive Board & Approval Contract Review and approval of subcontract awards Committee Liquidity controlling Supply mgmt controlling Service Audit Audit Liquidity controlling Departments Audit Receivables and Bid Start- Exe- Accept- Opera
Slide 15: Quantitative Benefit of Risk Management: Earnings position stabilised
Quantitative Benefit of Risk Management: Earnings Before Tax (EBT) § Earnings gain (on EBT basis): + EUR 184m § Of which, increase in project earnings: + EUR 109m § New contracts since Contract Review Committee established: • Contract value: EUR 4,134m • Earnings: EUR 69m • Return on work done: 1.7%
Slide 16: Qualitative Benefit of Risk Management
Qualitative Benefit of Risk Management § Knowledge transfer § Prevention § Board involvement at operating level § Management appraisal Shopping Center Karlsruhe 16
Slide 17: Today: Performance to 30/9/2003: Turnaround Achieved
Today Performance to 30/9/2003: Turnaround Achieved HOCHTIEF Europe 2003 2002 * Change (1/1-30/9) (1/1-30/9) (%) (EUR million) New orders 1,636.7 2,364.2 -30.8% Orders Work done 1,975.6 1,539.3 28.3% Order backlog 2,871.6 3,269.9 -12.2% Earnings before tax (EBT) 0.1 -48.3 EBITDA 11.0 -38.8 Earnings
Slide 18: Performance to 30/9/2003: Building
Performance to 30/9/2003 Building 2003 2002 Change (EUR million) (1/1-30/9) (1/1-30/9) (%) New orders 968.4 1,551.1 -37.6% Work done 1,127.7 1,111.0 1.5% Order backlog 1,403.4 1,803.6 -22.2% Earnings before tax (EBT) -29.5 -56.1 47.3% Employees (30 September) 3 917 4 513 -13.2% 18
Slide 19: Performance to 30/9/2003: Civil
Performance to 30/9/2003 Civil 2003 2002 Change (EUR million) (1/1-30/9) (1/1-30/9) (%) New orders 416.2 801.9 -48.1% Work done 563.4 418.5 34.6% Order backlog 1,203.4 1,456.0 -17.4% Earnings before tax (EBT) 6.3 -9.0 170.1% Employees (30 September) 1 702 1 757 -3.1% 19
Slide 20: Status now
Status now ü Lasting turnaround ü Successful risk management ü Continuously rising project earnings ü Resizing largely complete Gotthard Tunnel or in progress ü Continuous improvement in liquidity 20
Slide 21: Tomorrow: Outlook
Tomorrow: Outlook § Slight growth in business volume § Continuous earnings growth § Aiming for: • Return on work done > 2.5% • Return on equity > 19% § High standards of risk management to be maintained § Financial base to be strengthened by increasing liquidity § Constant review matching capacity t
Slide 22: Summary
Summary Ø The improvement in earnings is durable Ø The German construction market offers long-term opportunity to make money Ø Smart risk management is key to success Ø Our business model allows above-average returns on equity Rondo ONZ Warschau 22