Chairman's message

Dear shareholder,

Ferrovial had another very positive year in 2005. Once again, we maintained a high level of profitability and continued with an investment strategy that is leading to a profound change in the Group's business profile, now with greater international exposure and a business structure with more stable earnings.

In 2005, Ferrovial obtained 416 million euro in net profit, a 43% increase after adjusting for the extraordinary earnings on the 2004 Cintra IPO. Including those extraordinary results, 2005 profit was 21% lower. Cash flow in the year was a notable 1.151 billion euro, enabling us to end the year with just 272 million euro in debt despite investing a record 1.665 billion euro.

In construction, strong growth in Spain was accompanied by very positive performance in other countries, including a near-40% increase in revenues in Poland. The acquisition of Texan construction company Webber strengthens the Group's position in the United States, a market where we expect good results in the coming years. During the year, the backlog increased by 12% to 7.5 billion euro.

Growth in the infrastructure business was driven by three factors: consolidation in the North American market, intense bidding activity and a high success rate, and favourable decisions in the dispute between 407 ETR and the Province of Ontario. Four new concessions, in Spain, Italy, Ireland and the United States (the latter in 2006), refinancing of Chicago Skyway and Bristol airport, and sizeable improvements in operating variables at the infrastructure under management made for an extraordinary year at this division, as expressed by Cintra's 21% appreciation in the stock market during the year.

n Real Estate, revenues and earnings improved substantially, reinforcing Ferrovial's position as one of Spain's largest homebuilders. Incipient property development activities in Poland will shape this division's future growth.

There were two major events in the services division in 2005: we increased our stake in the 30-year contract to renovate and maintain three London Underground lines, and last summer we acquired Swissport, the world's largest independent airport handling company. Those acquisitions, plus the completion of Amey's restructuring, enabled the division to exceed 3.2 billion euro in revenues, positioning Ferrovial as one of Europe's leaders in street cleaning, municipal and industrial waste management and facility management, to which it has added airport handling.

Because of sustained growth and progress with diversification and internationalisation, our share price appreciated by 49% in 2005, the largest appreciation since the company was floated in 1999. Since then, Ferrovial has practically tripled its market capitalisation, compared with a 9% increase in the Ibex-35 index. The market clearly acknowledges Ferrovial's investment efforts (6 billion euro committed in the last nine years) and the dedication of its personnel at all levels of the organisation.

In 2005, the Group reinforced best practices in corporate governance and enhanced transparency. I am proud to mention the efforts made to implement voting and proxy-granting via means of distant communication at the Shareholders' Meeting, and the two prestigious corporate governance awards we received. Once again, the Annual Corporate Governance Report approved by the Board of Directors contains extensive, detailed information about this important aspect of our company's organisation and operations.

We are convinced that we still have a long way to go in terms of profitable development and growth of our business units, and in this process we are counting on your support, for which we are sincerely grateful.

Firma del Presidente

Rafael del Pino y Calvo-Sotelo
Chairman of Ferrovial
March 2006

 

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