Organización departamental en los hoteles

ment metric—to profit from operating activities in the IFRS-basis consolidated statement of earnings.

* see glossary on page 135 ** see glossary on page 134

To O u r S h C o rp o ra te G o ve rn a n c e H O C H T IE F S to c k M a n a g e m e n t R e p o rt c ia l S ta te m e n ts a n d N o te s

Profit after taxes reflected the Group’s very healthy busi- ness performance, rising from EUR 81.1 million in 2004 to EUR 151.3 million in 2005—an increase of no less than 86.6 percent. EUR 62.8 million of the total was allocated to

consolidated net profit, which thus increased by 52.4 percent from the prior-year figure of EUR 41.2 million. The minority interest amounted to EUR 88.5 million, compared with EUR 39.9 million in 2004. The substantial increase in the minority interest reflects profit growth at Leighton and at airport holdings in which minority shareholders hold sig- nificant ownership stakes.

The results for 2005 are rewarding testimony to the stabili- ty of our risk management and control system.

Cash flow

Consolidated statement of cash flows

HOCHTIEF generated strong positive cash flow amount- ing to EUR 418 million in fiscal 2005, up 30.7 percent from the 2004 figure of EUR 319.7 million. A major factor was substantially improved earnings from the Asia Pacific divi- sion. The EUR 298 million inflow of liquidity generated on setting up the investment partnership is reported in changes in other balance sheet items and thus adds to net cash provided by operating activities. In contrast, the balance of the increases in receivables and payables re- ported as changes in net current assets and resulting from the extra business volume produced a net cash outflow of EUR 164.8 million (versus EUR 155.8 million in 2004). The total figure for net cash provided by operating activities in the HOCHTIEF Group was EUR 635.6 million, compared with EUR 311 million in 2004.

Statement of Cash Flows for the HOCHTIEF Group (Summary)*

(EUR million) 2005 2004

Cash flow 418.0 319.7

Net cash provided by operating

activities 635.6 311.0 Net cash used for investing activities (299.5) (131.9) Net cash used for financing activities (110.8) (154.2)

Net cash increase in cash and cash

equivalents 225.3 24.9

Cash and cash equivalents

at year-end 1,061.3 769.6

Capital expenditure amounted to EUR 574.2 million, a decrease of EUR 103.9 million or 15.3 percent compared with the prior-year figure of EUR 678.1 million. Capital ex- penditure on purchases of intangible assets, property, plant and equipment and investment properties rose from EUR 440.3 million in 2004 to EUR 496.8 million in 2005, an increase of 12.8 percent. The lion’s share of this sum was accounted for by the Asia Pacific division, which spent EUR 409.3 million on property, plant and equipment for major infrastructure projects and for the ongoing ex- pansion of its mining business. Capital expenditure on property, plant and equipment remained at the previous year’s level in all divisions except HOCHTIEF Develop-

* The full Consolidated Statement of Cash Flows appears on page 90, in the Financial Statements and Notes section.

ment, which had invested more heavily in development projects in 2004.

As planned, capital expenditure on financial assets was significantly lower in 2005, at EUR 77.4 million compared with EUR 237.8 million in the previous year. Activities in 2004 were directed at expanding the business portfolio— increasing HOCHTIEF’s ownership share in Leighton, ac- quiring and paying capital into business holdings at Leigh- ton, and acquiring the Lufthansa Gebäudemanagement group. The focus in 2005 was on consolidating the new acquisitions, with capital expenditure on financial assets mostly restricted to putting capital into project companies in the Leighton Group. Total cash used for investing activi- ties was EUR 299.5 million, versus EUR 131.9 million in 2004, when cash outflows for capital spending were coun- tered by substantial cash inflows from sales of securities.

Cash used by financing activities totaled EUR 110.8 million in 2005, compared with EUR 154.2 million in 2004. The Airport division used most of the funds generated from the investment partnership to reduce bank borrow- ings. Loan repayments totaling EUR 509.9 million exceed- ed new borrowing of EUR 466.3 million.

After exchange rate changes, HOCHTIEF had EUR 1.06 billion in cash and cash equivalents as of December 31, 2005. This represents an increase of EUR 291.7 million from the prior-year figure of EUR 769.6 million.

Free cash flow was EUR 386.9 million in 2005, compared with a negative figure of EUR 80.5 million in 2004—a strik- ing indication of the continued growth in HOCHTIEF’s fi- nancial clout. Free cash flow consists of net cash provided by operating activities (EUR 635.6 million), proceeds from asset disposals (EUR 329.9 million), changes in cash and cash equivalents due to consolidation changes (minus 4.4 million), less capital expenditure (EUR 574.2 million).

Credit facilities for enhanced long-term financial security

HOCHTIEF further strengthened its financial situation in fis- cal 2005 by securing an internationally syndicated revolv- ing credit facility and a credit line in Canada. These major loan facilities testify to the Group’s strong credit standing. They are key to securing the funds needed for its divisional operations for the long term and so to implementing the Group financial strategy.

Following the EUR 1.65 billion syndicated revolving guar- antee facility secured in 2004, a EUR 600 million syndicat- ed revolving credit facility was signed with an international banking syndicate in 2005. The facility has an initial term of five years, with two one-year renewal options taking it up to a maximum of seven. The credit facility documentation, the agreed terms and the extremely positive response from the international banks involved reflect HOCHTIEF’s immac- ulate credit standing for long-term finance. Like the Group’s other guarantee and credit lines, the facility is unsecured and provides the funds necessary for planned investment in the Group’s growth activities.

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A further credit line for USD 300 million has been secured to enable the provision of bonds required for HOCHTIEF Construction AG to work on major infrastructure projects in Canada. The facility is initially provided solely for HOCHTIEF Construction AG and its Canadian activities, but can be extended to other Group companies if needed. HOCHTIEF Aktiengesellschaft provides indemnification.

Balance sheet

Consolidated balance sheet reflects HOCHTIEF’s financial strength

The balance sheet layout differs from 2004 to comply with changes introduced by the IFRS Improvements Project. Current and non-current assets and liabilities are now classified separately.*

Two main factors brought about changes in the Group’s net asset position in 2005:

HOCHTIEF further improved the structure of its pension arrangements in 2005. In 2004, sums previously invested in special-purpose investment funds and shares in a real estate development company were transferred to a pension plan under a contractual trust arrangement (CTA) covering HOCHTIEF Aktiengesellschaft. The CTA model has now been implemented for subsidiary HOCHTIEF Construction AG, including its subsidiary Streif Baulogistik. For both companies, the plan assets almost entirely comprise fixed- interest securities and a small proportion of cash or cash equivalents. Assets worth EUR 213.7 million were trans- ferred to the pension fund in 2005 to meet pension obliga- tions for the subsidiaries concerned. In compliance with International Financial Reporting Standards, pension pro- visions are stated on the balance sheet net of plan assets. The positive business trend in the operating divisions has also had a significant impact on the net asset position of the HOCHTIEF Group.

Despite the netting-out effect of the CTA, the expansion of business activities along with exchange rate effects pro- duced an increase in total assets to EUR 8.1 billion, up 11.1 percent from the end of 2004.

* see page 99 for further information

Within the total assets figure, non-current assets de- creased by EUR 124.4 million, or 4.7 percent, to EUR 2.42 billion. Property, plant and equipment grew by EUR 16.2 million to EUR 682.2 million. This was mainly due to sub- stantial capital spending at Leighton to carry out large-scale infrastructure contracts and to continue the expansion of its mining business. Conversely, the investment property portfolio shrank by EUR 28 million to EUR 206.6 million due to sales by the Development division. Intangible as- sets (mostly goodwill) increased by EUR 33.4 million to EUR 330.3 million. This was offset by a EUR 46.7 million decrease in non-current financial assets to EUR 912.5 mil- lion, primarily due to the sale of airport interests on estab- lishment of the investment partnership. Deferred tax as- sets decreased by EUR 105 million to EUR 144.7 million, mostly due to precautionary impairment charges on assets recognized for tax refund entitlements from German tax loss carryforwards.

Current assets were EUR 5.68 billion, having increased by EUR 934.6 million from December 31, 2004. Receiv- ables and cash and cash equivalents rose particularly strongly. The growth in receivables mostly reflects the marked expansion of our operating activities, which result- ed in substantially higher trade receivables. This operation- al growth and the cash inflow from the investment partner- ship boosted cash and cash equivalents by EUR 291.7 million to EUR 1.06 billion. The EUR 298 million cash inflow from the investment partnership did not produce a corre- sponding increase in year-end cash and cash equivalents as about a third was used to repay debt. The asset trans- fer to the HOCHTIEF Construction AG pension fund de- creased marketable securities by EUR 202.3 million. Top- up purchases at Turner and insurance-related additions cut this decrease to EUR 28.8 million, leaving the year-end figure for marketable securities at EUR 963.2 million. The securities transferred to the pension fund mostly com- prised fixed-interest securities, which are separately ad-

Consolidated Balance Sheet (EUR billion)