OHL sets the grounds of a sustainable and profitable business model

OHL embarked on a new era in June 2016 following the appointment of Juan Villar-Mir de Fuentes as Chairman of the Group and Tomás García Madrid as its CEO, focusing on actions aimed at recovering its customary standards of profitability and trust amongst stakeholders, based on the following:

• A business model where profitability and risk management enjoy priority over targets for growth
• Removal of all risk associated to legacy projects, in order to eliminate uncertainties and market concerns
• Its successful asset rotation policy in order to reduce debt
• A maximum estimated recourse leverage of 1x by the end of 2017, enabling us to recover the trust of rating agencies, amongst other issues
• A new syndicated facility of 747 million euros, evidencing the support given to the Group by reference banks
• A reduction in general and structural costs in order to improve profitability and generate cash flow

Factors that will influence company progress

Removal of the risk associated to legacy projects. OHL has focused its strategy on strengthening its balance sheet, by fully recognizing its legacy project losses; by reinforcing its presence on home markets- United States and Canada, Mexico, Peru, Colombia, Spain and Central Europe-; by strengthening risk control and contractual management devices at the bidding and execution stage; and by prioritizing the performance-risk trade-off over its target for growth.

Asset rotation policy, to help reduce debt and simplify OHL’s financial structure. Since June 2016, the company has launched a series of divestments in order to obtain 2,239 million euros by generating approximate capital gains of 381 million euros.

Total cancellation of margin call debt, consequently removing all risk. At 31 December 2016 margin call debt was zero, whereas two years earlier, at the end of 2014, it totaled 1,494 million euros.

Support from the banks, which have decided to hold their positions and commit a syndicated multi-product facility package of 747 million euros. The trust placed in the company by these banks is a result of our well-defined strategy, a solid and profitable business model for Construction and demonstrated commitment to reducing indebtedness.

Commitment to reduce recourse debt by the end of 2017 to a maximum of 1x, backed up by an asset rotation policy, which is expected to positively affect the evaluation of rating agencies and could potentially result in an upgrade. Thus, a better credit rating is a priority objective for the company.

Reduction in structural costs, by between 40 and 50 million euros, over the next 1-1.5 years. Two collective dismissal proceedings have been carried out in Obrascón Huarte Lain, S.A. and OHL Industrial, S.L., which will result in estimated annual recurring savings of approximately 38 million euros.

Left to right, Tomás García Madrid and Juan Villar-Mir de Fuentes, CEO and Chairman, respectively, at OHL Group.