Message from the Chairman
GUARANTEEING VINCI'S LONG-TERM FUTURE
VINCI separated the functions of chairman and chief executive officer in 2006. On 1 June, following the resignation of Antoine Zacharias, the Board of Directors designated me as chairman and confirmed Xavier Huillard in his functions as director and chief executive officer. Our complementary experience and the confidence we’ve built in each other in just a few months are two of the strengths that will guarantee VINCI’s long-term success.
As chairman, I am responsible for ensuring good corporate governance. Accordingly, I had an audit carried out by an independent consulting firm during the second half of 2006. On the basis of the recommendations received, I decided to modernise the way the Board operates. To that end, I changed the internal rules and revised the composition of the specialist committees in order to add greater depth to their understanding of the Group’s markets and strengthen their involvement in developing its strategy. To keep the Board fully informed and to bring it closer to the realities on the ground and to the Group’s senior executives, I convened the Board nine times meetings following my appointment in June. The October session was held in Prague so that the directors could meet our employees in the region and see for themselves the challenges and opportunities presented by the markets of Central and Eastern Europe. Now, after the voluntary departure of six of its members, I would like to take advantage of the partial renewal of the Board to develop collegiality and strengthen the directors’ independence. In addition, to broaden our discussions about strategy, I am committed to adding one or more female directors and diversifying the origins and areas of competence of Board members.
For VINCI, 2006 was a year of proving and strengthening its strategy. The rapid and successful integration of Autoroutes du Sud de la France gives greater breadth to our integrated concessions and construction model. The adoption of an ambitious three-year plan gives the markets a very clear idea of how the Group’s four core businesses are going to evolve. The plan, developed under Xavier Huillard’s leadership, was examined and adopted unanimously by the Board.
2006 was also the year of growth. Over the past 12 months, VINCI’s internal growth was outstanding, which is reflected in the increased number of public-private partnership (PPP) projects. And there was plenty of external growth too, with takeovers at the rate of one a week. This momentum led to the acquisition of Soletanche Bachy at the beginning of 2007, which will augment VINCI’s offering in special foundations and geotechnical engineering. It also led to VINCI increasing its shareholding in Cofiroute to 82.4%. The Board of Directors has every confidence in the quality of VINCI’s business mix, the Group’s potential for growth and the relevance of its integrated concession and construction model in a European market with immense infrastructure needs.
Lastly, VINCI’s stock market performance in 2006 and the revaluation process launched early in the year – our share price increased from €72.10 on 1 June 2006 to €110 at the beginning of 2007 – bears witness to the confidence of shareholders and markets alike. The strengthening of our principal shareholders, both French and foreign, and the increase in the number of individual shareholders are proof that they share our long-term vision. Our dividend policy, reflected in our decision to distribute 50% of the year’s net profit, also makes our share more attractive. Furthermore, our employees are our biggest shareholder block, with more than 8% of the capital at 31 December 2006. Involving employees in the Group’s results is a source of motivation and cohesion. It is also a source of improvements in the performance of the Group’s companies and a stabilising factor for the future. We are determined to see this situation continue.
VINCI has a balanced business portfolio, a clear mission to develop as an integrated concession and construction operator, a top quality management team and 142,500 motivated employees. Thanks to these factors, and to the excellent economic climate in all its markets, VINCI’s outlook is one of sustainable and profitable growth.
Yves-Thibault de Silguy
Chairman of VINCI’s Board of Directors
Message from the CEO
“Sharing our success”
“We intend to go full steam ahead with our economic model, which is based on our construction and concessions business lines fuelling each other.”
What is your overall impression of 2006?
For VINCI, 2006 was a year of both continuity and new impetus.
We see continuity in the ongoing growth momentum of our companies, which builds on the trend established in previous years. Our revenue rose 11%, mainly as a result of organic growth. Our order book reached a historic high in 2006, increasing 13% in one year. There are three things that are noteworthy about this growth. First, it is balanced: our business activity grew in all four of our business lines and in all of our markets – historic, new, local and global. Second, it is profitable: operating profit outpaced revenue; and last but not least. And lastly, it is enduring: it is part of the steady improvement in our performance year after year. All this shows that our model is effective. Our model has demonstrated its ability to weather economic downturns, and it naturally generates strong growth and profits in an economy that is buoyant over the long term, such as the one in which we are now operating.
The new impetus stems from our acquisition of Autoroutes du Sud de la France. The merger brought us back to our concession and construction model. It raised the share of our business activity generated by concessions compared with our three other major business lines – energy, roads and construction. It broadened our recurring revenue base: concessions now account for two-thirds of our cash flow. It strengthened our profile as an integrated concessions and construction operator and gave us the critical mass and new resources we need to accelerate our expansion in markets that will be bolstered over the long term by the growth of public-private partnerships.
What is VINCI projecting in terms of growth and what role will public-private partnerships play in that growth?
Because our business has become more predictable, we can now set medium-term objectives. That’s what we did when, for the first time, we presented a three-year strategic plan. It identifies a revenue target of €30 billion for 2009 – and the €26 billion we generated in 2006 shows that we’re ahead of schedule on this.
VINCI’s plan also includes an annual objective of winning new PPP or concession projects representing a total Group-share commitment of approximately €1 billion. This sends a clear message: we intend to go full steam ahead with our economic model, which is based on our construction and concessions business lines fuelling each other. Our business environment has never been as favourable. Concessions and PPPs are now extending beyond transport infrastructure to embrace projects of all sizes and all sorts – hospitals, gendarme stations, public lighting management, etc. Whole segments of urban programmes and major public facility works are covered. This is a long-term trend that will boost all our activities and strengthen all their long-term components, especially maintenance. The new contracts we picked up in 2006 are a harbinger of things to come, and 2007 is shaping up as a promising year, with VINCI in first place on what could become the largest concession contract in the company’s history – the construction and operation of a 365 km motorway in Greece, in which the total value of construction work exceeds €2 billion.
In other words, don’t change a model that works?
Correct, especially not when the model is so closely aligned with the long-wave trends in our markets. The fundamentals that have driven VINCI’s success for the past 10 years or so are the levers of its future growth: our economic model, which we will be enhancing by continuing to expand in our four business lines; our managerial model, which gives us exceptional agility on our markets; and our management principles, which emphasise margin over volume and focus on added value and the quest for recurring revenue streams – not only in concessions, but also in our other business lines, our core businesses rooted in their local markets.
What do you think of VINCI’s advertising campaign, which includes the Manifesto that you signed?
In the Manifesto, we affirm our deep-seated conviction and our strength: we believe that long-term economic success requires ambitious human goals. At VINCI, we will always give priority to people over systems. We bank on the creativity, independent initiative and responsibility of each and every one of our employees. Because we know that long-term success must be collective, we have built openness and generosity to others into our management principles. This “human chemistry” is our stock in trade – and ultimately it gives us our competitive edge, since it is the hardest thing to copy.
In other words, the VINCI machine is forging ahead and can not be judged merely by its economic performance. That’s the message we convey in our film showing the “human bridge” and it’s the meaning of our motto “Real success is the success you share”. We want to share our success with our employees, clients, shareholders and the community at large. We are proud of being the world’s leading construction and concession group, and we intend to be worthy of that position.
Xavier Huillard
Director and Chief Executive Officer