VINCI - 2008 annual report

Report of the Board of Directors
When it presented its 2008 earnings, VINCI did not continue to refer to this 2006-2009 plan, which was established on the basis of assumptions
made in a diff erent economic context, except for the 2009 targets for Ebitda margins on revenue for ASF (67%) and Cofi route (69%), which were
confi rmed under the assumption of stabilisation of toll revenues between 2008 and 2009. Realisation of this assumption remains dependent on
traffi c trends in 2009 as a whole.
2.2 Trends 2009
There has been no material change in the Group’s fi nancial and commercial position since 31 December 2008.
VINCI has a well-stocked order book (€23.2 billion at 31 December 2008), up 8% over twelve months and representing ten months’ average
business in its contracting business lines (energy, roads and construction).
Order book
(in € millions) 31/12/2008 31/12/2007
VINCI Energies 2,415 2,181
Eurovia 4,770 5,029
VINCI Construction 16,010 14,308
Contracting 23,195 21,515
On the basis of current trends, VINCI expects a probable stabilisation of its motorway subsidiaries’ toll receipts. The priority given to margins over
volumes in the contracting divisions could lead to a slight decline in revenue in these activities.
3. The Group’s markets: seasonal nature of business
Most of the Group’s activities – but especially roadworks, civil engineering and some motorway concessions – record lower business volumes
in the fi rst half of the year than in the second, mainly due to less favourable weather conditions. In 2008, the diff erence between the two halves
represented a diff erence in revenue of the order of 19%.
The seasonality of the Group’s business is also refl ected in the net use of cash over the fi rst half, due to the lower level of receipts during this
period and the pattern of operating cash fl ows, most of which are generated during the second half of the year. Group income and expenses from
normal business operations that are of a seasonal, cyclical or occasional nature are accounted for using the same accounting methods as those
adopted for the full-year fi nancial statements. Income and expenses invoiced on an annual basis (e.g. patent fees and licence fees) are accounted
for pro-rata using an estimate for the full year.
C. Risk factors
VINCI’s decentralised organisation allows it – applying the subsidiarity principle applied in the Group – to assess and handle risks at the most
appropriate level of responsibility (subsidiary, division, holding company) depending on their size. The Group’s general guidelines and its internal
control arrangements enable information to be submitted to the centre on the main risks and their treatment.
This chapter sets out the main risk factors faced by the issuer or its sector of activity. The main internal control procedures aimed at reducing
these risks are described in the Report of the Chairman on page 150.
In general, VINCI’s businesses are dependent on the economic climate and public-sector orders. If these decrease, pressure on volumes of activity
and prices may result. The Group’s dependence on the economic climate can also have a favourable eff ect through governmental countercyclical,
economic stimulus policies, in particular through the launching of infrastructure projects, which constitute opportunities for VINCI.
1. Operating risks
1.1 Commitments
Commitments, connected in particular to the taking of orders or acquiring or disposing of activities, constitute the fi rst risk with which VINCI
companies are faced, whatever their fi eld of business (concessions, energy, roads, construction, property, etc.).
1.1.1 New business
The Group has set up a policy for selecting new business. Procedures for monitoring commitments before they are taken have been applied for
many years.
In the contracting divisions (VINCI Energies, Eurovia, and VINCI Construction), Group companies seek to avoid the risks connected with accepting
new business at an early stage by means of the terms and conditions of off ers made, and in particular the associated technical, legal and fi nancial
commitments.
These commitments are usually limited, because of the generally modest size of contracts for works, their length which is usually of a few
months, and because of the great diversity of skills, geographical locations and customers. At VINCI Construction France, approximately 50% of
revenue is generated by contracts that are individually of less than €5 million. VINCI Construction Grands Projets, which builds larger constructions,
for its part accounts for less than 2.5% of the Group’s consolidated revenue. In this area, the Group’s policy is to favour projects with high
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