The OHL Group’s sales and EBITDA are expected to grow 30% and 352% to 5 billion and 1 billion euros, respectively, in 2017

OHL is starting a new cycle, the results of which will been seen in the next two years, the two key financial years within the 2020 Strategic Plan that will mark the future performance of the company, according to the estimates presented today on the occasion of Investors Day.

Since the arrival of OHL’s new management team, in June 2016, led by Juan Villar-Mir de Fuentes, Chairman, and Tomás García Madrid, CEO, OHL has focused its strategy on shoring up its balance sheet, with the full recognition of its legacy projects, on reinforcing its presence in its home markets, on strengthening risk control and contract management mechanisms in the bidding and performance phases and on prioritizing the risk/return ratio over the growth objective.

These aspects have been accompanied by a firm determination to reduce the company’s debt, driven by an asset rotation policy.

Lines of action of the company

Boosting the income statement. The company’s estimates indicate that sales in 2017 would grow 30% more than in 2016, to 5 billion euros, and that EBITDA would be placed at 1 billion euros, with estimated growth of 352% -this latter figure, so large due to the extraordinary revision of the legacy projects in 2016.

In this same direction of recovery, it is expected that sales in 2018 will reach 6.4 billion euros, with 28% growth with respect to 2017, while EBITDA will amount to 1.2 billion euros in 2018, up 23%.

These estimates are supported by the recovery experienced by the Engineering & Construction area, in addition to the process for the reduction of overhead costs, which will be placed between 40 and 50 million euros in the next 1-1.5 years. 

Strong reduction of debt. In its effort to reduce recourse net debt, OHL expects that this figure will reach 177 million in 2017 –pro forma including the divestitures planned- in comparison to the 748-million-euro figure in 2016, with a reduction of more than 76%. To achieve this objective, it will use its asset rotation strategy, which includes the divestitures in Abertis (2.5%), Centro Canalejas Madrid (17.5%), Mayakoba (80%/51%), ŽPSV (100%), Autovía A-2 (75%) and the entry of minority partners in the Latin American greenfield concessions.

Sound business model.  This business model is based on organic cash generation in the recourse scope, particularly in Engineering & Construction, on reducing corporate debt, excluding project financing, and on the implementation of a policy of asset rotation with capital gains. OHL has a healthy and profitable construction model –a backlog worth 6 billion euros, close to 90% of which is in its home markets: the U.S., Canada, Mexico, Peru, Chile, Colombia, Spain and Central Europe, and an 8% gross margin-. The company considers the Nordic countries, Ireland and Saudi Arabia as potential home markets and has its presence in Australia, The Philippines and Vietnam under review.

Regaining the confidence of the rating agencies.  The identification and reduction of the impact of the legacy projects on the income statement, strict control and monitoring for improving the generation of cash flow, the reduction of recourse gross debt, the reduction of overhead costs and the sale of assets for a total of 700 million euros should have a positive impact on the appraisals by the rating agencies and could result in an improvement in the company’s rating.

Bank support. In this new stage, a significant development has been the signature on March 30 of a package of additional financing in a total amount of 747 million euros (190 million in a credit line, 465 million in a line of sureties and 92 million euros in a reverse factoring line) with a platform of banks made up by Caixabank, Banco Sabadell, Bankia, Santander, Popular, Société Générale and Crédit Agricole. This transaction reaffirms the confidence of these institutions in the company’s plan for the future.