1. GAM has reached an agreement with its financial entities to reschedule its debt repayment in order to adjust repayment to suit the current industry conditions and company results.
GAM has gained backing from its financial entities, which represent 75% of its total debt level, to defer 100% of capital debt repayments due throughout the period June-December 2009. As of the year 2010, 65% of corresponding debt repayments have also been deferred, thus guarantying the long term financial stability of the company.
The above mentioned agreement made with the banks implies the deferral of a total of 152 million Euros. Moreover, the company intends to progressively include the remaining financial entities in the agreement. This inclusion will be agreed upon in a second round of negotiations.
This new structure will bring about stabilisation in company debt repayments and permit the implementation of its business plan without a substantial rise in the financial cost given that it will be based on a single tranche representing 30% of total company debt.
Repayment schedules will vary as other financial institutions are incorporated. With those financial institutions included at present, repayments remain as such:
Repayment Schedule (millions of Euros)
-Excludes convertible bond and various working capital lines (credit lines and sales discounts) which will be renewed upon their maturity date in 2012-
2009 2010 2011 2012 2013 onwards
Old 124 150 118 91 41
New 41 81 124 96 154
2. Cash flow maintenance and debt reduction remain firm priorities. At the close of this semester, gross debt had reduced by 43 million compared to the level reported in December 2008. Net debt was equally reduced leaving a debt level of 569.8 million. Liquidity level remains constant at 62.5 million Euros.
Payment Collection remains steadily positive, with results in the first semester reflecting a reduction in the average Days of Sales Outstanding: DSO dropped to 128 days, based on data from June 2009. Sales Debt has fallen to 137 million Euros.
As a result of company activity in the first six months and the effective management of working capital, operations have generated cash flow (before debt repayment) of €80 million. The company has met all debt obligations (Capital plus interest) in the first quarter and maintains a liquidity level of €62.5 million.
June 2008 Dec 2008 June 2009
Machinery Associated Debt 457 401 355
Acquisition Associated Debt 95 103 106
Convertible Bond 126 112 101
Other Debt (Sales and Credit Debt) 2 36 48
GROSS DEBT 670 652 610
Cash flow and Equivalent -47 -41 -40
NET DEBT 633 609 570
In the first six months of 2009, the company purchased convertible bond in value of 14.9 million Euros (notional value) at an average price of 32% of its notional value. This operation has two positive impacts on the profit and loss account: On the one hand, it generates a total of 10 million Euros in financial incomes and on the other, extraordinary results in value of 1 million Euros generated from the reversion of issue expenses.
3. Sales in the first six months of 2009 reached 143 million, 25% down from sales level in the same period in 2008. The resultant EBITDA: 30%. EBITDA has reached 43.3 million Euros. Total cost reduction has achieved savings of 15.1 million in comparison to the level of expenses incurred in the same period of the previous year (10.5 net million Euros subtracting for damages and other non recurrent expenses.)
Activity in the National Construction Industry has suffered throughout the first semester, in line with the drop in activity faced in the last semester of 2008.
Millions of Euros S1- 2008 S1-2009
Sales 190 143
Growth -25%
Various indicators show, that particularly in the months of May and June, over all activity is beginning to show signs of stabilising. In Civil Works, the company continues to demonstrate is leading position in the market:
- The number of works contracted by GAM has remained stable for over a year
- Hiring in new projects and works has been maintained at its traditional rate, representing 50% of all works up to June 2009, in line with the same percentage of new projects in 2008.
The company maintains its strong emphasis on cost reduction in all aspects of activity. By June, the company had reached 60% of the total cost cutting objective set at 50 million Euros of savings (annual reduction in expenses subtracting for damages and other non recurrent expenses in value of 30 million Euros.)
Millions of Euros S1- 2008 S1-2009
Sales 190 143
EBITDA 80.8 43.3
EBITDA Margin 43% 30%
4. GAM’s prospects remain positive given its business model. Its continuing diversification and strong international growth will continue to be its principal growth drivers. With growth of 24% its international business will accelerate total company activity.
GAM’s Internationalization strategy is based on 4 main drivers: (i) the focus on countries with important plans in infrastructures; (ii) the focus on countries in which total activity in the machine rental sector is weakly exploited (iii) the focus on the relocation of machinery from Spain’s Park to international destinations and (iv) the focus on offering support and service to Spanish Constructors operating internationally.
With a total rise in level of activity of 24%, the international sector is rapidly increasing activity levels, just as new business ventures in Mexico and Arabia are beginning to develop. Similarly to the results found in the Diversified Sectors, International shows better EBITDA margins than those reported in the traditional Spanish Construction line of business.
In the first six months, GAM has accelerated the level of activity in Saudi Arabia, Mexico and Brazil. The activity in these three new countries, contribute to overall international activity already based in Portugal and Eastern Europe (Poland, Romania and Bulgaria.)
In the final semester of this year, the company will commence activity in Peru and Panama, where the subsidiaries have already been constituted and the initial team of personal already in place. Moreover, there are further plans for development in other companies, which are being set up gradually.
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