Managing Director's letter
Revenues totalled €2,513 M in 2009, up 6%, in line with our target. Order intake rose by 5% to €2,697 M, 7% more than revenues in the period and implying 6% growth in the order book, which now totals €2,579 M, amply exceeding the objectives we set early in the year.
EBIT was €285 M, 6% higher than in 2008. It is worth highlighting that, in a year of increasingly fierce competition and price pressure, Indra managed to maintain its EBIT margin at 11.4%, in line with the previous year’s figure and well above the industry average. Attributable profit increased by 7% to €196 M. Operating cash flow totalled €338 M, up 9% year-on-year.
As regards Indra’s financial position, at 2009 year-end net debt was €135M (0.4 times EBITDA and 10% lower than in 2008) following an ordinary dividend payout totalling €99 M, considerably higher than the €80M paid in 2008.
This is all especially significant at a time of economic and financial contraction such as this. Year-end net working capital was equivalent to 80 days’ revenues, which, although higher than last year, is a major improvement on our projections.
International revenues drove the company’s growth and positive performance. International markets (36% of revenues) grew by 11%, while the domestic market increased by 3%. Latin America and North Africa, plus some South-East Asian countries (China, India and the Philippines), grew very quickly, evidencing the strength and competitiveness of our range of services and solutions.
The process of globalising our activities is therefore forging ahead according to plan: business in Latin America has been buoyant and international activity across the board, particularly in Transport & Traffic, has seen order intake and the portfolio of opportunities swell.
The trend for outsourcing and supplier concentration has enabled Indra to gain market share, building on commercial relations with our main customers, as evidenced by the 13% growth achieved in the Services segment. Services order intake for the Telecommunications & Media, Energy and Financial Services sectors was particularly impressive.
In Solutions, we posted 2% growth. It is worth highlighting the contracts won in air traffic management (i.e. China, Tunisia and Peru) and in financial services, where the risk management and core insurer systems performed extremely well. Systems to efficiently manage public administrations, healthcare and control and automation of energy networks won notable references in international markets.
By vertical market, it is worth highlighting the strong growth in Transport & Traffic (+15%) and Telecommunications & Media (+11%), as well as the robust performance in Financial Services (+7%) and Public Administrations & Healthcare (+5%). Revenues remained stable in Energy & Industry and Security & Defence segments during the year, thanks to international commercial activity.
Looking ahead to 2010, we expect a very sluggish general and industry-specific economic environment with similar levels of competitive pressure, especially domestically and most notably in the institutional demand segments. However, we are confident that the strong order book and major commercial opportunities generated in the international markets will enable us to continue growing in terms of order intake and revenues.
Consequently, we have again set ourselves demanding targets for 2010. We expect to boost revenues by 2%-4%, increase order intake by more than 5% and maintain an ordinary EBIT margin of around 11.4%. Once again, the international market will be our growth driver.
We are convinced that international development and accelerating the globalisation process are key to our future project. In the last few years, we have laid solid groundwork to achieve these demanding objectives. Never before have we had such a broad and powerful brand, portfolio of opportunities or exposure to leading customers.
Profitability is still a priority for Indra. As we have been doing for the last few years, this year we will implement the necessary measures to maintain high operating efficiency and productivity levels by improving processes and applying stringent cost containment and management.
Consequently, in 2010 we will focus on improving processes at the company, specifically in risk management, control of operations and talent management.
Technological development is generating new medium-term business opportunities in devising digital solutions that render infrastructure intelligent. Digital, sensorised and interconnected intelligent infrastructure will be the basis for radically transforming business models and creating increasingly global value chains in sectors such as energy, transport and healthcare. Accordingly, we think the demand for solutions will be driven by the need of organisations to strengthen their competitive advantages by broadly digitalising infrastructure and defining new ways of working based on the potentialities offered by intelligent infrastructure.
The outsourcing of services or business processes is not only a key tool to allow companies to cut costs, but it also gives them the capacity to access technological innovations that enable them to marshal competitive advantages, to distinguish themselves from competitors and boost their competitiveness. This is why we project continued growth in the services business.
Permanent innovation and a comprehensive and valuable range of services and solutions are the pillars of our commercial strategy. Accordingly, we aim to continue developing new initiatives to increase the competitiveness of our offering, to bring us closer to our customers and boost our ability to respond to their needs, thereby enhancing our competitive position.
In this sense, R&D activity continues to bear fruit in the creation of solutions able to compete globally. Our insurance platform and healthcare and energy solutions are but some of the examples that illustrate this.
Indra was born with a great ambition: to develop value-added solutions and services for the most demanding customers anywhere in the world. Without their trust, we would not be able to achieve this. We owe our customers the utmost gratitude and our commitment to continue providing them with a range of solutions and services tailored to their needs. It is the talent of our professionals that enables us to respond to these demands and thereby strengthen our capacity to continue growing.
Our future hinges on our ability to persevere and progress in the four areas I have mentioned: developing our highly technology-oriented solutions and services, recruiting and retaining the most talented professionals, maintaining and strengthening the position of an increasing number of leading customers with large-scale business projects and boosting our global development and presence.
At Indra we firmly believe that, once again, we will rise to the challenge.
Regino Moranchel
Managing Director
