Call: 1810

FINANCIAL MANAGEMENT REVIEW

IMBA

Asignatura:

Financial Management

Profesor/a:

María José García López

Nombre Completo del Estudiante:

Relevant information about the company
FCC is a company dedicated to design and construction since 1900, initially through Fomento de
Obras y Construcciones (FOCSA), with a founding capital of five million pesetas. It was in 1911,
when they began their diversification policy, with the contracting of the services of cleaning and
conservation of the sewage system in Barcelona, this was a transcendental milestone in the
company's trajectory. Years later (1940), once the civil war ended, FCC has an outstanding
participation in the arduous task of reconstructing infrastructures (railway bridges and roads,
mainly) as well as in the construction of factories that recompose the modern industry sector of
Spain .
As part of its internationalization policy, in 1979 they contracted the first large project abroad,
corresponding to the 640 km channeling for coaxial cable of the telephone network of Tripoli
(Libya). Also, in 1981, international expansion began in the area of services with the contracting
of urban solid waste collection and road cleaning in Caracas.
An important event for this company happened in 1992, when Construcciones y Contratas, S.A.
merges with Fomento de Obras y Construcciones, S.A. (Focsa), giving rise to Fomento de
Construcciones y Contratas, S.A. (FCC), is the root of this merger that the company starts trading
on the stock exchange, becoming the first, in size and profitability, among those in its sector.
It is during 2013 that Esther Alcocer Koplowitz is named as president of the highest governing
body of the group, who currently continues to hold the position.
Throughout its history, FCC has been responsible for various emblematic buildings, such as the
expansion of the port of Barcelona, the urbanization of Plaza España, the construction of the
first toll road in Spain, among others.
I. FCC TODAY
FCC currently has more than 115 years in the market, with operations in more than 40 countries
and more than 57,000 employees.
FCC is diversified throughout the world through the following business divisions:
Environment: This unit is responsible for managing and treating domestic and industrial waste,
as well as cleaning streets and maintaining parks and gardens, among other activities. Its
strategy is based on maintaining its leadership in Spain and continuing to grow in international
markets, based on three pillars: innovation, sustainability and social responsibility. The
companies that comprise them are:
o FCC Scope: Leader in management and recovery of industrial and commercial waste, recovery
of by-products and soil decontamination.
o FCC Environment (UK): Waste and resource management in the United Kingdom.
o FCC Environment (CEE): Management of sustainable waste in Central and Southeast Europe.
o FCC Environmental Services (USA): Management of resources and services to citizens in the
United States.
The Water area: This operates under the Aqualia brand, deals with the integral cycle, from the
infrastructures necessary for the service to the supply to homes and businesses, its strategy is
based on specialization and growth.
Infrastructure and Cement: In this division they are dedicated to the production of cement as
well as the design, development and maintenance of infrastructures throughout the world,
whose strategy is to focus on select projects and profitable geographies, that is, to focus on large
international projects. It is made up of the following companies:
 o FCC Construcción: Its activities cover all areas of engineering and construction.
o FCC Industrial: Responsible for carrying out projects and services related to industrial and
energy installations.
o FCC Concessions: boosts the group's presence in the construction and administration market
of the main infrastructure projects. FCC participates in distributed concessions in extremely
diverse business sectors, such as roads, hospitals and office buildings.
o Cementos Portland Valderrivas: Responsible for the production of cement, concrete,
aggregates and mortars.
o Realia Business: promotes, manages and conducts business using all types of real estate. Its
areas of activity include real estate through the development and leasing of the offices and
commercial centers it owns, as well as housing development and land management.
Historically, FCC shares have had ups and downs, showing in recent months an improvement in
the value of them.

Other relevant data:

Number of shares: 1.058.752.000
Quotation: 20,1 €/Share
Payout: 40%
Knowing the above information and the information provided in the annexes
listed below, calculate the following ratios and state your opinion about the
economic-financial situation of the company in relation to the sector.
Ratio Formula Result Endesa Sector
2017
Solvency CA/CL x 100 101,4%
Acid Test CA – Inventory / CL x 100 88,4%
Cash Current Financial Assets + Cash / CL x 100 14,6%
Leverage NCL + CL / NCL + CL + E x 100 26,7%
Quality of Debt Long and short term debt with cost / NCL + CL + E x 46.8%
100
Distance to Insolvency Total Assets / NCL + CL x 100 132,5%
Total Asset Turnover Revenue / Total Assets 0,7
Return on Assets (ROA) EBIT / Total Assets x 100 3,49%
Return on Investment Net Income / Total Assets x 100 2,13%
(ROI)
Return on Equity (ROE) Net Income / Equity x 100 7,65%
Earnings per share Net Income / number of shares outstanding 0,49€
Dividend Yield Quotation / dividend per share 2,3%
PER Quotation / Earnings per share 14,5 years
Average Collection Period 365 / Receivables turnover (sales/trade receivables) 160 days
Average Payment Period 365 / Payables turnover (procurements / trade 134 days
payables)
COMPARATIVE REPORT

When comparing the FCC company with the sector we observed the following:

In relation to the solvency ratios, it can be observed that FCC has higher solvency ratios, as well as acid and cash test
ratios to those of the sector. The solvency of the sector is also good, due to it is higher than 100% as in our company,
although in the case of FCC it is better. The fact that there is not much difference between the solvency ratio and the
acid test is indicative that the inventory does not have a high weight in the current assets of the company or the sector,
which is also important and positive, showing a high turnover, with less possibility of breakage and risk of
obsolescence.
In relation to the cash ratio, FCC has a good ratio and higher than that of the sector, but it is too high. To check
whether it is acceptable or not the high cash ratio in FCC, we need to analyse if this cash is being financed with
equity or with liabilities.

When analyzing the leverage of the company, we see that it exceeds 70%, with the sector in a much better position.
In addition, the ratio of debt to cost is also high, so, as indicated above, we consider that in this financial situation
the balance in cash is excessive and should use part of this cash to try to reduce the debt. It is precisely the low net
worth it has in relation to indebtedness that makes FCC have a distance to insolvency ratio much worse than the
sector.

In relation to returns, all are positive and acceptable, only ROI being lower than the sector. We understand that if
the box were reduced as we pointed out in the previous paragraph, the total assets would be reduced and this
would increase the ROI to figures close to the sector. In any case, we can affirm that FCC uses its assets efficiently
and that its ROE is high, as a result of its low net worth.

Earnings per share are approximately half that of the sector, which may be a consequence of having a greater
number of outstanding shares, given that the returns are good. When calculating the dividend per share to obtain
the dividend yield, we see that the payout is similar, given that the dividend per share of the sector is also
approximately 50% of the earnings per share. In relation to the PER, the average of the sector is better than that of
our company, given that it would take less time to recover the investment.

When analyzing the PMC and the PMP we see that the policy of our company FCC is better than that of the sector, as
the PMC is clearly inferior to the PMP, which allows it to generate the cash needed to meet supplier payments
without compromising its cycle of deal.

In short, we consider that FCC should reinforce its net worth and with this, it would improve its financial situation,
the only point where it is in a comparative situation worse than that of the sector.