Interim Management Report
Financial Review
Earnings
HOCHTIEF substantially boosted sales in the first nine months of the year. Group sales totaled EUR 14.01 billion, an increase of 14.6 percent on the comparative prior-year figure of EUR 12.23 billion.This very healthy growth was largely driven by our international activities. Sales generated by our American subsidiaries Turner and Flatiron grew 11.5 percent to EUR 5.8 billion, up from EUR 5.2 billion in the prior-year period. The HOCHTIEF Asia Pacific division increased sales by a significant 18.4 percent to EUR 5.36 billion. HOCHTIEF Europe likewise sustained its upward trend in sales, benefiting from the continued strength of Eastern European markets. This resulted in a 10.8 percent rise in divisional sales to EUR 1.69 billion, up from EUR 1.52 billion in the first three quarters of 2007. Successful outcomes on real estate developments and expansion in the promising sector of energy management also produced high double-digit sales growth at the HOCHTIEF Services and HOCHTIEF Real Estate divisions.
HOCHTIEF delivered impressive growth on all measures of earnings through the first nine months of 2008. Operating earnings were up to EUR 549.5 million, an increase of almost 60 percent on the EUR 344.1 million figure for the prior-year period. This was largely accounted for by marked improvements in earnings at the HOCHTIEF Asia Pacific and HOCHTIEF Europe divisions. The strong business trend at Leighton enabled HOCHTIEF Asia Pacific to raise operating earnings by 45.3 percent to EUR 443.5 million, up from EUR 305.2 million in the first three quarters of 2007. Operating earnings at HOCHTIEF Europe were still negative due to overheads on ongoing loss-making projects started in previous years, but the loss was narrowed significantly from EUR 128.6 million in the prior-year period to EUR 46.8 million in the period under review.
Net income from participating interests came to EUR 192.2 million – only slightly short of the EUR 208.4 million comparative figure for 2007, which was swelled by nonrecurring items. There was substantial extraordinary income in 2007 due to a special dividend from Sydney Airport and a corporate tax reform in Germany (prompting a remeasurement of deferred taxes included in the carrying amount of the equity-accounted investment in Hamburg Airport). Adjusted for these items, net income from participating interests from airport activities was up on the first three quarters of 2007. This underscores the sustained positive operational trend at HOCHTIEF's airport holdings. The HOCHTIEF Asia Pacific division contributed EUR 67.2 million toward Group
Net investment and interest income was a negative EUR 92.2 million, well below the positive EUR 27.7 million figure for the prior-year period. Expansion into new segments and the substantially increased volume of business together with the requisite level of capital expenditure led to corresponding borrowing on the capital market and hence to a significant rise in interest expense.
The improvement in earnings contributed by the various divisions, in some cases substantial, fed through to profit before taxes totaling EUR 415.3 million. This represents an increase of 21.1 percent on the EUR 343.1 million figure for the prior-year period.
Income taxes were higher than the comparative prioryear figure as expected in line with earnings growth, up from EUR 127.3 million to EUR 147.7 million. The effective tax rate, at 35.6 percent, shows a further decrease from the 37.1 percent recorded for the same period a year earlier.
Profit after taxes accordingly exceeds the comparative prior-year figure by 24 percent, increasing from EUR 215.7 million to EUR 267.6 million.
Consolidated net profit grew even more strongly, increasing by 48.8 percent to EUR 105.2 million compared with EUR 70.7 million in the first three quarters of 2007. Consolidated net profit attributable to minority shareholders rose by 12 percent to EUR 162.4 million, up from EUR 145.1 million in the prior-year period.
