Managing Director’s letter
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Dear shareholder: Although the general and sectoral economic environment deteriorated further and more quickly than anticipated, Indra met all its objectives for 2008 which were revised upwards on two occasions during the year. In particular, there has been a favourable evolution on international markets with double digit growth in order intake and revenues. 2008 revenues totalled € 2,380 M , which represents a10% increase on the figures for 2007. Order intake grew 11% to reach € 2,579.4 M. Backlog grew by 8% to € 2,428 M which is more than double the year’s revenue. Net operating profit (EBIT) grew 21% to € 270 M. Operational profitability has increased yet again, with the ebIT/revenue margin at 11.4% against 11.1% for 2007 (not including extraordinary costs resulting from the integration of Azertia and Soluziona). Net profit grew by 23% to € 182 M, which permitted a 24% increase on Earnings Per Share (EPS). With regard to its financial position, Indra closed 2008 with net liabilities of € 149 M having paid out an ordinary dividend totalling € 80 M during the year. Operational cashflow increased by 23%. Net working capital was, as anticipated, slightly higher than a year ago (76 revenue days as opposed to 73 days at year end December 2007). The solutions and services segments have both grown at a rate of 10%. The positive evolution of the solutions segment is due, in particular, to international air traffic management systems; land traffic, rail traffic and ticketing systems; the security market; solutions for the financial services sector; and the international telecommunications market. Growth in the services segment was mainly in financial services markets and increasingly, public administrations because both these markets are interested in initiatives that improved efficiency and productivity. The Security and Defence, Transport and Traffic markets continued positively in the year with 8% and 10% growth rates respectively. The increase was close to 20% in both cases in the international market, a market which already generates 43% of joint Security and Defence revenues, plus Transport and Traffic. In Telecom and Media, the national market has evolved positively with double digit growth, but again, the international market (Latin America and the European Union) was the main area of growth in 2008. The Financial Services market is still one of the company’s major growth areas, and this trend is likely to continue, together with the Telecom and Media market in 2009. The double digit growth in 2008 in the national market (in finance and insurance) and in the international market is particularly remarkable and is due to the high investor level of leading Spanish financial entities, where Indra is well-regarded. The growth in the public administrations and healthcare market is due to the positive evolution of the national market in the central administration area, mainly in justice and tax. Finally, the energy and industry market has seen an upturn in the area of energy in the national market and in industry in the Latin American market, with these trends continuing throughout the year. For 2009 we anticipate a more negative general and sectoral economic environment than last year, in line with the trend already evident in the last quarter. Despite this situation, Indra has the potential to continue growing and registering better trends than the other companies in its sector and maintain its high operating profitability. In 2009 international markets will again be the main driver of the company’s growth. In view of the market backlog and the significant commercial opportunities which have been generated over the last two years, Indra has the potential to continue with double digit growth in international markets in terms of order intake and revenues. In order to preserve its profitability levels, since 2008 the company has been applying strict policies on expenditure control and costs management, reviewing its operational processes so they are permanently being optimised and will continue to do so in 2009. In this context, 2009 targets specify a 5 to 7% growth in revenues, with greater growth in international markets; higher growth in order intake than in revenues for the year, enabling the backlog to be increased yet again; and a continuing EBIT margin of between 11.3% and 11.5%. At the moment it is not easy to know when new circumstance will occur that will drive demand up to double digit growth which has been the tonic in previous financial years. We know that the influence of technology in economic activity is an essential global and competitive element, and for that reason we are optimistic that that in the near future we will return to higher growth levels. We are confident that we will know how to anticipate which will be the most relevant sectors and in what way the new demand that impulses change at all times. Regino Moranchel |
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