The directors, chaired by Paolo Astaldi, met yesterday to approve a strategic update of the group鈥檚 business plan for 2017 to 2021. Chief executive officer Filippo Stinellis said that 2016 was a transformational year for the company. 鈥淲e successfully repositioned the business to better leverage our unique commercial capabilities. In light of the faster-than-expected progress that we have made this year, we updated the strategy plan with upgraded targets for revenue, improved cash conversion of earnings and reduced financing costs. As we build a stronger and 鈥榝itter鈥� business, our focus for 2017-2021 remains on securing sustainable revenue growth and high quality earnings while reducing the group鈥檚 overall risk profile.鈥�
Astaldi will continue to develop the business and its capital structure based on three key pillars 鈥� sustainable growth, drivers for de-risking and financial strength. The geographic focus of the business will increasingly shift towards opportunities in lower risk markets where there is significant opportunity. The Group鈥檚 target markets 鈥� North America, Europe and Chile 鈥� will offer high amounts of infrastructure investment in the short and medium term.聽
The strategy plan set out in 2016 outlined a gradual repositioning of the backlog towards engineering, procurement and construction (EPC) contracts to better leverage areas of competitive strength. The Group secured 鈧�3.6bn of new orders in construction in 2016 and will continue to work towards a target revenue split of over 60% EPC contracts. EPC tenders are seen as offering a higher quality of earnings, supporting sustainable margin development and cash flow, than the traditional tenders, assigned on lowest price.
The group will continue to pursue concessions opportunities, but with a 鈥渃apital light鈥� approach. Thanks to the introduction of an operations & maintenance (O&M) business line, Astaldi plans to convert a portion of its concession backlog into revenue opportunities. O&M activities generate high margin revenue with low capital expenditure, said the company. One of the plan鈥檚 2017-2021 targets is to generate c. 10% of revenues from the O&M business line.
聽Last year marked an accelerated shift towards lower risk markets (Italy, Europe, US, Chile). Over the plan period a higher proportion of revenues and earnings will come from lower risk geographies, said Astaldi. Margins will slightly decrease as a result of this shift, but the impact will be offset by better financing terms and improved quality and visibility of cash flow, it predicts.
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