Alternative Performance Measures

EBITDA = GROSS OPERATING RESULT

• Definition: operating result before charges for fixed asset and right of use of leases depreciation and amortization.
• Reconciliation: the company presents the calculation of EBITDA in the Consolidated P&L (see the Consolidated Profit and Loss Account in the Management Report and the Consolidated Financial Statements) as: Gross Operating Profit = Total Operating Revenues – Total Operating Expenses (excluding those relative to fixed assets and right of use assets depreciation and amortization which are reported on a separate line).
• Explanation of use: EBITDA provides an analysis of the operating results, excluding depreciation and amortization, as they are non-cash variables which can vary substantially from company to company depending on accounting policies and the accounting value of the assets. BITDA is the best approximation to pre-tax operating cash flow and reflects cash generation before working capital variation. Therefore we use EBITDA as a starting point to calculate cash flow, adding the variation in working capital. Finally, it is an APM indicator which is widely used by investors when evaluating businesses (multiples valuation), as well as by rating agencies and creditors to evaluate the level of debt, by comparing EBITDA with net debt.
• Comparisons: the company presents comparative figures with previous years. In order to improve the comparison, it is also presented EBITDA ex – IFRS 16 where current EBITDA is adjusted by the operating expense due to leases under the scope of IFRS 16 as it would not have been applied (see further explanation in like-for-like growth).
• Coherence: the criteria used to calculate EBITDA is the same as the previous year.

COMPARABLE (“LIKE-FOR-LIKE GROWTH” LfL)

• Definition: relative year-on-year variation in comparable terms of the figures for revenues, EBITDA, EBIT and order book. The comparable is calculated by adjusting the present year and the previous one, in accordance with the following rules:
  • Elimination of the exchange-rate effect, calculating the results of both periods at the rate in the current period.
  • Elimination from the EBIT of both periods of the impact of fixed asset impairments and results from company disposals (corresponds with the figure reported in the line “Impairments and disposals of fixed assets”).
  • In the case of company disposals and loss of control, the homogenization of the operating result is undertaken by eliminating the operating results of the sold company when the impact occurred in the previous year, or if it occurred in the year under analysis, considering the same number of months in both periods.
  • Elimination of the restructuring costs, in both periods.
  • In acquisitions of new companies which are considered material, elimination, in the current period, of the operating results derived from those companies, except in the case where this elimination is not possible due to the high level of integration with other reporting units (material companies are those whose revenues represent ≥5% of the reporting unit’s revenues before the acquisition).
  • Elimination in both periods of other non-recurrent impacts (mainly related to tax and human resources) considered relevant for a better understanding of the company’s underlying results.
  • This year with the adoption of IFRS 16 leases, and for a better comparison of the gross operating profit and operating profit figures with those of the previous year, we have proceeded to undo the adjustments for this concept, reversing the adjustment for financial expense and depreciation of the right of use and recognizing a higher operating expense for leases, as if the new standard would not have been applied in the current period.
  • In addition, for the operating profit figure of the Services division, presented as discontinued operations, in order to improve their comparability with respect to the previous year, the depreciation amount of the assets has been adjusted as if they were still operating in the normal course of business during the current year.
  • Note: the new contracts in the Toll Roads division coming into operation are not considered acquisitions and thus are not adjusted in the comparable.
• Reconciliation: the comparable growth is presented in separate columns on Business Performance of the Management Report.
• Explanation of use: Ferrovial uses the comparable to provide a more homogenous measure of the underlying profitability of its businesses, excluding those non-recurrent elements which would induce a misinterpretation of the reported growth, impacts such as exchange-rate movements or changes in the consolidation perimeter which distort the comparability of the information. Additionally, it also allows the Company to present homogenous information, thus ensuring its uniformity, providing a better understanding of the performance of each of its businesses.
• Comparisons: the comparable breakdown is only shown for the current period compared with the previous period.
• Coherence: the criteria used to calculate the comparable “Like-for-like growth” is the same as the previous year, except for the reversion of the adjustments made for the application of IFRS 16 and the adjustment of the depreciation of assets of discontinued operations, which will only be made during the current period. We consider that this is the best way to present comparable figures for EBITDA and operating profit in order to see the evolution of the business with respect to the previous year. On the one hand, IFRS 16 on leases is the first year of adoption and has been applied retroactively, adjusting the balances at 1 January 2019, without restatement of comparatives. With respect to the second concept, assets classified as held for sale in accordance with IFRS 5 are not depreciated; however, on presenting the result of the Services division, the information is provided as if they were continuous operations for both periods.

FAIR VALUE ADJUSTMENTS

• Definition: the adjustments to the Consolidated P&L relative to previous results derived from: changes in the fair value of derivatives and other financial assets and liabilities; asset impairment and the impact of the two above elements in the ‘equity-accounted results’.
• Reconciliation: a detailed breakdown of the Fair Value Adjustments is included in the Consolidated Profit and Loss Account (see the Consolidated Profit and Loss Account in the Management Report and the Consolidated Financial Statements).
• Explanation of use: The Fair Value Adjustments can be useful for investors and financial analysts when evaluating the underlying profitability of the company, as they can exclude elements that do not generate cash and which can vary substantially from one year to another due to the accounting methodology used to calculate the fair value.
• Comparisons: the company presents comparisons with previous years.
• Coherence: the criteria used to calculate the Fair Value Adjustments is the same as previous year.

CONSOLIDATED NET DEBT (NCP)

• Definition: this is the net balance of cash and cash equivalents (including short and long-term restricted cash), minus short and long-term financial debt (bank debt and bonds), including the balance related to exchange-rate derivatives that cover both the issue of debt in currency other than the currency used by the issuing company and cash positions that are exposed to exchange rate risk. The lease liability (due to the application of the new IFRS 16 standard) is not part of the Consolidated Net Debt.
• Reconciliation: a detailed breakdown of the reconciliation of this figure is given in the section 5.2 headed Net Debt and Corporate Credit Rating in the Management Report.
• Explanation of use: this is a financial indicator used by investors, financial analysts, rating agencies, creditors and other parties to determine the company’s debt position. In addition, Ferrovial breaks down its net debt into two categories:
  • Net debt of infrastructure projects. This is the ring-fenced debt which has no recourse to the shareholder or with recourse limited to the guarantees issued. This is the debt corresponding to infrastructure project companies.
  • Net debt ex-infrastructure projects. This is the net debt of Ferrovial’s other businesses, including the group holding companies and other companies that are not considered infrastructure projects. The debt included in this calculation is mainly with recourse, and is thus the measure used by investors, financial analysts and rating agencies to assess the company’s leverage, financial strength, flexibility and risks.
• Comparisons: the company presents comparisons with previous years.
• Coherence: the criterion used to calculate the net debt figure is the same as the previous year.

ORDER BOOK

• Definition: the income pending execution, which correspond to contracts which the Company has signed up to a certain date, and over which it has certainty on its future execution. The total income from a contract corresponds to the agreed price or rate corresponding to the delivery of goods and/or the rendering of the contemplated services. If the execution of a contract is pending the closure of financing, the income from said contract will not be added to the order book until financing is closed. The order book is calculated by adding the contracts of the actual year to the balance of the contract order book at the end of the previous year, less the income recognized in the current year.
• Reconciliation: the order book is presented under key figures under Services and Construction sections of the Management Report. There is no comparable financial measure in IFRS. However, a breakdown of reconciliation with Construction and Services sales figures is provided in Note 2.1 in the Consolidated Financial Statements. This reconciliation is based on the order book value of a specific construction being comprised of its contracting value less the construction work completed, which is the main component of the sales figure. The difference between the construction work completed and the Construction and Services sales figure reported in Ferrovial’s Financial Statements is attributable to the fact that consolidation adjustments, charges to JVs, sale of machinery, confirming income and other adjustments are made to the latter. In addition to contracts awarded and the construction work completed, the exchange rate of contracts awarded in foreign currency, rescissions (when a contract is terminated early) or changes to the scope are all aspects that also have an impact on the movement between the original order book (corresponding to the previous year) and the end order book (for the year in question), as shown in the tables at the end of this document. Management believes that the order book is a useful indicator in terms of the future income of the company, as the order book for a specific construction will be comprised of the final sale of said construction less the net construction work undertaken.
• Explanation of use: the Management believes that the order book is a useful indicator with respect to the future income of the Company, due to the order book for a specific work will be the final sale of said work less the work executed net at source.
• Comparisons: the company presents comparisons with previous years.
• Coherence: the criteria used to calculate order book is the same as the previous year.

WORKING CAPITAL VARIATION

• Definition: measurement that explains the conciliation between the EBITDA and the operating cash flow before taxes. It is the result of the non-cash-convertible gross income primarily from changes in debt balance and commercial liabilities.
• Reconciliation: in Note 5.3 Cash flow of the Consolidated Financial Statement, the company provides a reconciliation between the working capital variation on the balance (see description on Section 4 Working Capital of the Consolidated Financial Statement) and the working capital variation reported in the Cash Flow Statement.
• Explanation of use: the working capital variation reflects the company’s ability to convert EBITDA into cash. It is the result of company activities related with inventory management, collection from customers and payments to suppliers. It is useful for users and investors because it allows a measurement on the efficiency and short-term financial situation of the company.
• Comparisons: the company presents comparative reports from previous years.
• Consistency: the criteria employed for calculating the working capital variation is the same as the previous year.

TOTAL SHAREHOLDER RETURN

• Definition: sum of the dividends received by shareholders, revaluation/depreciation of the shares and other payments such as the delivery of shares or buy-back plans.
• Reconciliation: the total shareholder return is presented under the share part of section 1.1 of the Management Report. There is a breakdown of the reconciliation with the shareholder return in the financial statements.
• Explanation of use: it is a financial indicator used by investors and financial analysts, to evaluate the performance that shareholders have received throughout the year in exchange for their contribution in capital of the Company.
• Comparisons: the company presents comparative reports from previous years.
• Coherence: the criteria employed for calculating shareholder return is the same as the previous year.

MANAGED INVESTMENT

• Definition: managed investment is presented under Toll Roads in section 1.2 of the Management Report. During the construction phase, it is the total investment to make. During the operating phase, this amount is increased by the additional investment. Projects are included after signing the contract with the corresponding administration (commercial close), on which date the provisional financing terms and conditions, which will be confirmed after the financial closing, are normally available. 100% of investment is considered for all projects, including those that are integrated by the equity method, regardless of Ferrovial’s participation. Projects are excluded with criteria in line with the exit from the consolidation scope.
• Reconciliation: Managed investments at the end of December 2019 came to 21,949 million euros and are made up of 24 concessions in 9 countries. The composition of managed investments by asset type is as follows:
  • Model projects Intangible Assets IFRIC 12 (in operation), 7,324 million euros (6,196 million euros at December 31, 2018). The managed investment coincides with the gross investment balance in these projects included in the table in section 3.3.1 of the Consolidated Financial Statement: 6,937 million euros from NTE, NTE35W, LBJ and I-77 included in USA Toll roads (5,074 million euros at December 31, 2018). This year the I-77 was transferred to operation for 659 million euros (479 million euros were under construction last year). Additionally, 387 million euros from the Azores are included in other Toll roads. Of the total investment, 713 million euros relating to Ausol (736 million euros at December 31, 2018) has been transferred to the equity method as control was lost during the year.
  • (2) Model projects Intangible Assets IFRIC 12 (under construction), no project currently exists.
    (3) Model projects Accounts Receivable IFRIC 12 (in operation), 448 million euros (232 million euros at December 31, 2018). Includes the managed investment in Autema. The balance at year-end comes to 716 million euros (669 million euros at December 31, 2018), including the long term and short term (see section 3.3.2 of the Consolidated Financial Statement) and, amongst others, financial remuneration of the accounts receivable, which is not considered an increase in the managed investment in the asset.
  • (4) Consolidation using the equity method, 14,177 million euros (11,565 million euros at December 31, 2018). Includes both projects in operation and under construction that are consolidated using the equity method, such as 407 ETR and extensions 4,421 million euros of 100% managed investment (4,095 million euros at December 31, 2018) or I-66, with 2,695 million euros at 100% (2,642 million euros at December 31, 2018). In the consolidated statement of financial position, these projects are included under Investments in associates, meaning the investment cannot be reconciled with the balance sheet.
• Explanation of use: data useful by Management to indicate the size of the portfolio of managed assets.
• Comparisons: the company presents comparisons with previous years.
• Coherence: the criteria employed for calculating the managed investment is the same as the previous year.

PROPORTIONAL RESULTS

• Definition: this is the contribution to the consolidated results in the proportion of Ferrovial’s ownership in the group subsidiaries, regardless to the applied consolidation method. This information is prepared to EBITDA.
• Reconciliation: a reconciliation between total and proportional figures is provided in the website.
• Explanation of use: the proportional results can be useful for investors and financial analysts to understand the real weight of business divisions in the operative results of the group, especially keeping in mind the weight of certain assets consolidated under the equity method as 407 ETR from Toronto and the airport of Heathrow. It is an indicator that other competitors with significant subsidiaries in infrastructure projects consolidated under the equity method present.
• Comparisons: the company presents comparisons with previous years.
• Coherence: the criteria used to calculate proportional results is the same as the previous year.