management report 07 © 2008 GRUPO EMPRESARIAL SANDO S.L.
Design and layout: JWeb Rare Design Cover design: Sando Communications Department Printing: El Callejón del Arte Photographs: Sando archives index
SANDO IN FIGURES ...... 7 REAL ESTATE DIVISION ...... 47 Introduction ...... 49 LETTER FROM THE PRESIDENT ...... 9 Vision ...... 49 Organigram ...... 50 LETTER FROM THE VICE-PRESIDENT Activity by geographical area ...... 50 AND THE MANAGING DIRECTOR ...... 11 Business areas ...... 51 THE COMPANY ...... 15 Real Estate promotion ...... 53 History ...... 17 Housing starts, constructed and sold ...... 53 Mission ...... 17 Evolution of sales ...... 54 Vision ...... 17 Promotions ...... 54 Values ...... 18 Real Estate Management ...... 57 Description of business areas ...... 18 Patrimony ...... 61 Organigram ...... 18 Projects in development ...... 63 Executive Committee ...... 19 Organisational capacity. Human resources ...... 66 Activity by geographical location ...... 19 Objectives ...... 68 Management figures ...... 20 SUPPLIES AND MATERIALS DIVISION ...... 71 CONSTRUCTION DIVISION ...... 27 Introduction ...... 73 Introduction ...... 29 Vision ...... 73 Business vision ...... 29 Organigram ...... 74 Organigram ...... 31 Organisational capacity. Human resources ...... 74 Activity by geographical area ...... 32 Activity by geographical area ...... 75 Licenses ...... 33 Business areas ...... 75 Principal clients ...... 34 Extraction, treatment and commercialisation of áridos ....75 Evolution of Production ...... 35 Production and commercialisation of cement and mortar ...76 Evolution of the Portfolio ...... 35 Production of agglomerate and project execution ...... 78 Technical capacity. Resources ...... 36 Transport activities ...... 79 Organisational capacity. Human resources ...... 38 Investments ...... 80 International presence ...... 40 Quality ...... 81 Objectives 2008 ...... 41 New projects ...... 82 Notable Actions ...... 42 Objectives ...... 82 ENVIRONMENT DIVISION...... 85 General Secretariat...... 128 Introduction ...... 87 Legal services. Vision. Resources. Activities ...... 128 Vision ...... 87 General Services. Vision. Activities ...... 130 Organigram ...... 87 Insurance. Vision. Activities ...... 130 Investments ...... 88 Documentation and archives. Vision. Activities ...... 130 Business areas ...... 88 Central Administration ...... 131 Evolution of Production ...... 89 Vision ...... 131 Evolution of the Portfolio ...... 91 Administration activities ...... 131 Quality ...... 91 Finance ...... 131 Organisational capacity ...... 92 Vision ...... 131 New projects ...... 92 Financing ...... 131 Objectives ...... 94 Management Control ...... 132 Notable actions ...... 95 Vision ...... 132 Activities ...... 134 CONCESSIONS DIVISION ...... 101 Projects ...... 134 Introduction ...... 103 Communications and Image ...... 134 Vision ...... 103 Vision ...... 134 Licenses ...... 103 Internal and External Communication ...... 135 Principal concessions ...... 105 Advertising and Image ...... 136 Investments ...... 112 Activities ...... 136 New projects ...... 112 Research, development and innovation ...... 137 Objectives ...... 112 Vision ...... 137 Activities ...... 137 CORPORATE DIVISION...... 115 Introduction ...... 117 ANNEX: ANNUAL ACCOUNTS ...... 141 Organigram ...... 117 Human resources ...... 118 ANNEX: CORPORATE SOCIAL RESPONSIBILITY...... 201 Vision ...... 118 Vision...... 203 Organisational structure ...... 118 Activities related to civil society...... 204 Evolution of staff levels ...... 118 Activities related to the Environment...... 205 Selection and remuneration ...... 120 Activities related to the personnel...... 206 Training ...... 121 Projects ...... 121 SANDO FOUNDATION...... 207 Prevention and safety...... 122 Vision...... 208 Vision ...... 122 Social objectives...... 208 Activities ...... 123 Activities...... 209 Projects ...... 124 Projects ...... 210 Organisation and systems ...... 124 Vision ...... 124 DIRECTORY...... 211 Organisation ...... 125 Quality ...... 1 2 6 Vision ...... 126 Projects ...... 127
management report 07sando
6 índice
Sando in Figures
Principal Figures 2007 2007 2006 2007/2006 2005 2004 2003 CAGR 03-07
Aggregate turnover (MM €) 1.036,3 759,5 36,45 519,8 372,4 401,3 26,77% Consolidated turnover (MM €) 900,9 659,4 36,62 449,9 302,8 337,6 27,81% EBITDA OPERATIONS (MM €) 133,9 112,8 18,71 71,6 48,3 48,7 28,77% EBT OPERATIONS (MM €) 58,6 59,7 -1,84 48,5 33,5 34,3 14,33% Operating revenues a.i. (MM €) 70,1 74,2 -5,53 46,9 47,2 38,4 16,24% Asset portfolio asset revenues (MM €) 0 88,3 -100,00 0 0 0 Aggregate results (MM €) 70,1 162,5 -56,86 46,9 47,2 38,4 16,24% Net results (MM €) 52,4 112,1 -53,26 31,8 22,5 22,4 23,67% Average Staff (persons) 2.012 1.641 22,61 1.359 1.114 1.094 16,45% Equity (M €) 333,4 265,3 25,67 153 119,2 96,6 36,30% Total assets (MM €) 2.740,2 1.706,3 60,59 940,6 740,6 453,5 56,78% Employment generated (employees / year) 43.145 31.692 36,14 21.291 15.540 16.746 26,69%
2007 2006 % increase
Funds on hand 940,7 424,7 121,49 NAV 3.169,6 1.889,0 67,80 Fixed Assets 389,7 270,0 44,33 Stock 1.407,0 833,0 68,91
Equity Millions of euros Oficinas de Sando en Madrid introduction
Letter from the President
I am pleased to once again present the Sando Management Report for the year 2007.
During the last six years, Sando has consolidated its growth and become one of the leading develo- pers in Spain. The company has established a presence throughout the country and has a clear inter- national focus, as demonstrated by the excellent results achieved in Poland. Since the beginning, over 32 years ago, our vision has been to grow into a great company with all this entails: a well established company where solid and secure growth are part of its business culture and vision.
As the figures from the previous year show, the company’s profits and turnover are seeing continuous growth, especially in the area of Construction, the main pillar of the company. But let us not overlook other areas which are a key part of our development: the high quality of the projects, products, ser- vices to both clients and suppliers as well as constant technological innovation established on solid financial foundations.
Our strategy in terms of planning and actions in the different business areas has been fundamental to overcoming the crisis currently effecting the sector since mid 2007. Turnover has grown more than 36%, reaching the historic figure of 1,000 million Euros, with an average accumulated rate of growth during the last four years of 26.7%. The Construction Area, representing over 56% of the entire activity of the company, increased its results by 36.2%.
In an increasingly competitive market, our company is dedicated to offering services of the highest quality, with a spirit of continuous improvement and ensuring the safety and well-being of our per- sonnel. These are some of the qualities which set us apart from other companies in the sector and have served to enhance our reputation. Sando is increasingly well-known and is considered a leader in the sector.
Our capacity for international expansion, a strategic line of action which will continue throughout 2008, together with our solid financial structure and great potential for growth as a developer and holder of prime properties, allows us to face the future with optimism, even during the difficult mo- ments experienced by the sector.
9 management report 07sando
This constant development is only possible where there are solid corporate values, with a spirit of de- dication in the resolution of any difficulties which may arise, defined goals, the competitiveness and professionalism of our teams, loyalty and a dedication to constant improvement.
Sando has also established ambitious social goals. We apply our experience and knowledge to avoid workplace risk and work to find an improved balance between professional and family life. During 2007, the Sando Foundation became the focal point of the company’s social commitments and res- ponsibilities, an inherent characteristic of our company.
We have been able to consolidate the position of our great company thanks to the work and dedica- tion of many people who have committed themselves to this project. The professionals who make up Sando are an example of dedication, organisation, technical expertise and responsibility. Their efforts and commitment to continuous improvement have made this company what it is today.
I wish to take this opportunity to express my gratitude to all for their hard work and dedication and to thank society as a whole for the opportunities they have afforded us and for their faith in Sando.
José Luis Sánchez Domínguez President
10 introduction
Letter from the Vice-President and Managing Director
El The growth and consolidation of Sando are achieved day by day, in a solid and continuous man- ner. The creation of this report has required us to reflect on the developments of this past year and allowed us to examine the activities carried out during this productive year.
This has been a year of consolidation for Sando, establishing itself as one of the leading companies in the Spanish construction sector. The company has strengthened its position in Poland and participa- ted in various contracts and tenders in Mexico.
Sando posted a turnover of 1,036.3 million Euros in 2007, an increase of 36.5% over the previous year, surpassing the highly symbolic figure of 1,000 million Euros with an average accumulated growth of 26.8% over the last five years.
This positive development has been the product of strategic planning involving all areas of the business. The engine, as in previous years, has been the Construction area, with operating revenues of 33.8 million Euros, accounting for 48% of the total, an increase of 36.29% over the previous year despite the difficult situation of the sector. Turnover in this division totalled some 585.4 million Euros, 34.07% more than 2006 and five times that of the year 2000. This area represents 56.49% of total Sando turnover.
The year saw several significant projects, some terminated and others in execution, such as the Torres de Hércules building in Cadiz, the highest in Andalucia; the AVE connection Madrid-Valladolid and Madrid–Malaga, with other projects including the San Pedro Tunnel or the Puente Genil station. The most important tenders adjudicated in the last year included: the expansion of the Campo de Vuelos in the Airport of Malaga; the Albacete–Montesa pipeline; the Campo de Dalías desalination plant in Almería; the Pontos–Borrasa section of the high-speed AVE line Madrid–Zaragoza–French Border, or the Santa Marta de Magasca–Cáceres section of the Trujillo–Cáceres Motorway, among others.
The process of geographical diversification begin two years ago, with a growing presence in Eastern Europe, has enhanced and consolidated the growth of the company and diluted the effects of the slowdown experienced by the sector in Spain. Our current projects in Poland include the promotion of 386 homes in Bemowo, 149 in Mokotow and 195 in Ochota.
11 management report 07sando
The Real Estate division, the purchase of Agofer in April of 2007 for 220 million Euros, whose structure has now been integrated into Sando, has established the company as a leader in the sector. This divi- sion posted a turnover of 259.9 million Euros in 2007, an increase of 63.6% over the previous year. The operating results fell 31.3% as a result of the structure of Agofer and the slight dip in sector activity.
This area has property holdings of 7.9 million square metres totalling 2.7 million square metres in edification or 21,700 homes, representing ten years of activity. As of December 31, 2007, Sando’s real estate holdings were valued at 3,027 million Euros.
In 2007, the Materials and Supplies area accounted for 15.46% of total turnover, with revenues of 159.7 million Euros, up 10.52% over the previous year. The operating results were 9 million Euros, an increase of 2.27% over the year 2006. This area has maintained its consolidated position within the sector with some of the most modern treatment and classification of aggregates in Europe, and model installations for the company operations and environmental protection such as the La Cabaña facility in La Rinconada, Sevilla.
One of the activities which is parallel to construction and which generates significant complementary revenues is the Concessions Area. The division achieved a turnover of 6.5 million Euros in 2007, up some 209.52% over the previous year although this is a long-term return activity which still posted operating losses of 1.3 million Euros. Sando analyses international markets in order to present tenders for adjudication.
The Environment Area achieved a turnover of 24.8 million Euros in 2007, an increase of 26.53% over 2006. This division represents a core value of Sando supports the Construction Area and generates its own Projects as well. Its mission is to provide integrated environmental services: gardening and landscaping, reforestation and special treatments such as those related to roadway cleaning, waste management, integrated water management, etc.
During the course of the past year Sando has strengthened its position in terms of operating turnover and capitalisation, providing additional evidence of its success. As of December 2007, company equi- ty reached 333.4 million Euros, up 25.67% from the previous year. The average rate of accumulated growth over the last four years has been some 36.3%, giving the company a high degree of market capitalisation. The increase in the reserve fund has been 121.49%, as a consequence of the conside- rable increase in the value of the portfolio of current promotions and holdings. The valuation of Real Estate holdings, estimated using the Patrimonial Value Method, totalled some 3,169 million Euros at the end of the year, with a wide margin between the market value and cost. Additionally, stock levels rose from 833 million Euros in 2006 to 1,407 million in 2007, an increase of 68.91%.
12 introduction
The company posted an aggregate pre-tax profit of 70.2 million Euros, down from 162.54 million the previous year. This decrease was due to the extraordinary income of 88.3 million Euros in 2006 resul- ting from the sale of Sando’s 12.5 % stake in the company DUSE.
The economic downturn is particularly effecting the construction and Real Estate sectors, which be- gan to see a slowdown in 2007, a trend that will most likely continue into 2008 and 2009. The current economic situation requires the adoption of measures in order to face the immediate future in an un- favourable context and Sando has adopted a new Strategic Plan for 2008-2012. This Plan ensures that Sando maintains its level of growth, progressively strengthening its balance sheet and maintaining the financial solidity which has been a hallmark of Sando. The Plan will allow the company to increase its capacity to assume new challenges and achieve its future goals.
Achieving the defined objectives is not possible without the commitment of all members of the company, the professionals whose efforts and dedication make this project possible. I would like to thank all Sando’s personnel for this dedication and spirit of improvement while encouraging them to continue in their efforts to improve as a company.
These actions are supported by the values which directly link the business management of the com- pany and our social responsibilities. Since the end of 2006, all activities in this area have been chan- nelled through the Sando Foundation which contributes to the conduct of policies benefiting Sando employees as well as identifying and undertaking actions for society as a whole.
With these assets, together with our traditional values of providing maximum quality and service to our clients, Sando faces the future with optimism, secure the belief in our continuing improvement and growth.
Luis Sánchez Manzano Vice-president – Managing Director
13 the COMPANY
History Mission Vision Values Description of business areas Organigram Corporate Governance Activity by geographical location Management figures management report 07sando
Tuneladora tramo Siete Aguas-Buñol. AVE Madrid-Levante
16 the company
History
Sando is one of the largest companies in the construction sector in Spain with a consolidated presen- ce both nationally and internationally.
The company is centred around Construcciones Sánchez Domínguez, a company providing comple- mentary services to the construction industry founded in 1974 and which provides the base for the evolution of the company.
During this period, the company has expanded throughout Spain and diversified its activities into six business areas: Construction, Environment, Concessions, Materials and Supplies, Real Estate an d Corporate services.
In 2005, Sando extended its activities to Eastern Europe through its Real Estate division, establishing its headquarters in Warsaw in early 2006 where the Construction division was also established in 2007.
The company is currently active in Spain, Poland, Hungary and has begun presenting public tenders in Mexico.
Mission
To develop activities in the areas of Construction, Promotions, Concessions, Materials, Services and the Environment, ensuring the profitability and stability of our business and excellence in our rela- tions with clients and suppliers.
Vision
To be the leading Infrastructure, Real Estate and services company at the national level with a solid international presence recognised for its dedication to providing added value to our investors, our commitment to our professionals, and dedicated to sustainable development and the defence of the environment.
17 management report 07sando
Values
Sando business actions are founded on the values of dedication, quality, respect, tolerance, workpla- ce safety and risk prevention, sustainability, equal opportunity, teamwork and solidarity.
Description of the business areas
Sando is structured into five operational business divisions and a sixth corporate area which provides transversal services to the other areas, unifies and co-ordinates activities, and improves the processes of the group, permitting the effective specialisation in the areas of:
• Construction • Environment • Concessions • Materials and Supplies • Real Estate • Corporate
Organigram
PRESIDENT
VICE-PRESIDENT AND MANAGING DIRECTOR
CORPORATE AREA
CONSTRUCTION MATERIALS AND REAL ESTATE CONCESSIONS ENVIRONMENT AREA SUPPLIES AREA DIVISION AREA AREA
18 the company
Executive Committee
President D. José Luis Sánchez Domínguez Vice-president and Managing Director D. Luis Sánchez Manzano Director general Corporate Services D. Francisco Javier Gestoso Pro Director general Construction and the Environment D. Luis Aznar Almazán Director general Real Estate D. José Luis Miró Morales Director general Materials and Supplies D. José Villodres Padilla Director general Concessions D. Diego Varona Fidalgo
Activity by geographical area
Sando is active throughout Spain, with offices in the principal cities of the country and is also present in Eastern Europe, specifically Poland and Hungary.
N W
E
S
Warsaw
POLAND
Budapest HUNGARY
Madrid Barcelona Extremadura Valencia Sevilla Murcia Malaga
19 management report 07sando
Management figures
Evolution of the business and situation of Sando
During the year 2007, the Construction area increased its turnover by 29.46% over the previous year. It contributed some 56.5 % to the total turnover of Sando, allowing the company to post an increase of 36.45% over 2006, exceeding the benchmark figure of 1,000 mil million Euros.
This coincides with the change in the economic cycle. In the last five years Sando has maintained an annual rate of accumulated growth (Cagr) of 26.77%, passing from 401 million Euros in turnover in 2003 to 1,036 million in 2007. It can be affirmed without a doubt that Sando has been able to take full advantage of the bonanza years, experiencing vigorous growth which, with the change in cycle, will not be seen again in the years to come.
Most significant figures for 2007
Sales MM€ % Contribution Operating Results % Contribution Margin s/sales Construction 585,4 56,49 33,8 48,15 5,77 Concessions 6,5 0,63 -1,3 -1,85 -20,00 Environment 24,8 2,39 0,9 1,28 3,63 Real Estate 259,9 25,08 27,8 39,60 10,70 Supplies and Materials 159,7 15,41 9,0 12,82 5,64 TOTAL 1.036,3 100,00 70,2 100,00 6,77
If the Construction area grew by an average accumulated rate of 25.04%, reaching 585 million Euros, the second area in volume, Real Estate, has experienced an even greater rate of growth, topping 61.72%, passing from 38 millions in turnover in 2003 to 259.9 million Euros in 2007. This area contribu- tes 25% of Sando’s total turnover.
A significant event last year was the acquisition of the Real Estate developer Agofer Group, whose various companies have been merged into the companies of Sando. This acquisition provided signifi- cant growth in the Real Estate portfolio of the Group as well as expand the geographical area where it is active. The purchase has been a significant addition to the Real Estate division of Sando, increasing activities in central Spain and operations in Cataluña and the Levante region.
20 the company
Evolution of sales
The merger operation represented a significant effort on the part of the company, which successfully integrated both structures entirely in a few short months.
The third area in terms of turnover is the Materials and Supplies area. This increased operations in the last year 10.51% and in the last five years has seen accumulated growth of 9.08%. In accordance with the established directives, this area has not expanded its geographical area due to the difficulty in acquiring licences for new installations for environmental reasons. In absolute terms, the area contri- buted 159.7 million Euros to the company figures, some 15.41% of aggregate turnover.
The Environment area has continued in its process of balanced growth with an average accumulated growth rate of over the last five years of 25.49%, although as yet, just as with the Concessions area, this division does not contribute significantly in the group’s earnings.
Evolution of business results by area of activity (MM€)
2003 2004 2005 2006 2007 Cagr 03-07 Construction 239,5 199,2 279,9 452,2 585,4 25,04% Concessions 1 2,8 1,8 2,1 6,5 59,67% Environment 10 9,6 13,5 19,6 24,8 25,49% Real Estate 38 47,6 99,1 158,9 259,9 61,72% Supplies and Materials 112,8 113,2 130,5 144,5 159,7 9,08% TOTAL 401,3 372,4 524,8 777,3 1.036,3 26,77%
21 management report 07sando
The total consolidated turnover for the year 2007 reached 901 million Euros, an increase of approxi- mately 37% over the previous year. Additionally, profit margins have improved, rising from 8% in 2006 to 12% in 2007.
The increase in the results for ordinary activities over the year 2006 was some 25%, despite the signi- ficant increase in financial costs resulting from rising interest rates and the increased volume of bank financing (to finance Corporate and Real Estate acquisitions). Earning after tax of the previous year were higher than 2007 due to the extraordinary income resulting from the sale of stakes held in other companies.
Evolution of operating profits
The 70.2 million Euros pre-tax operating profits for 2007 are divided among the various areas of the group as follows: Construction 33.8 million Euros, Real Estate 27.8 million Euros, Materials and Su- pplies 9 million Euros, Environment 1 million Euros and Concessions losses of 1.3 million Euros.
The Construction division has increased its profitability over Production passing from 5.48 to 5.77 po- ints. The Real Estate division has note the beginnings of the crisis in the sector; not so much in sales as in profitability, which dropped noticeably for two reasons: firstly, in the short term, the promotions acquired through Agofer have reduced profit margins and, secondly, the significant drop in the Real Estate market which, together with the financial crisis of the summer of 2007, has not permitted the execution of planned operations. Materials and Supplies also reduced profitability as a result of increased competition in a shrinking market. The Environment area has strengthening its position in central Spain allowing it to increase operations in the medium term. Finally, the business of the Con-
22 the company
cessions area has not yet matured, maintaining a Portfolio of Projects requiring investments of some 300 million Euros in the next four years.
Evolution of operating revenues by business area (MM€)
2003 2004 2005 2006 2007 Cagr 03-07 Construction 18,9 23,5 14,9 24,8 33,8 15,64% Concessions 0,5 1,1 0,2 -1,5 -1,3 n/a Environment 1,7 1,4 1,5 1,6 0,9 -14,70% Real Estate 8,5 13,8 23,4 40,5 27,8 34,48% Supplies and Materials 8,8 7,4 3,9 8,8 9 0,56% TOTAL operating revenues 38,4 47,2 43,9 74,2 70,2 16,28% Extraordinary 88,3 n/a TOTAL OPERATING REVENUES (before tax) 38,4 47,2 43,9 162,5 70,2 16,28%
The sum of operations has allowed the company to increase its equity by 25.67% reaching 333.4 mi- llion Euros. The annual accumulated growth of equity over the last five years has been 36.30%.
During the year 2007, the Concessions area has made leveraged investments in projects and, especia- lly, in its Real Estate portfolio.
Evolution of Equity
23 management report 07sando
Future perspectives
Sando’s strategy of diversifying its business areas and geographical markets will continue over the coming years.
It is estimated that the turnover of the Construction area experiences significant growth over the previous year, thanks to the execution of projects in portfolio and new adjudications, as well as the increase in its participation in Uniones Temporales de Empresas, with growth expectations in the longer term, in line with the evolution of the Construction area and the development of services.
Furthermore, the activities in the Real Estate division are expected to be maintained and consoli- dated despite the delicate condition of the sector and the Spanish economy in general. This will be made possible by the termination of approximately 1,000 homes during 2008, of which some 800 have been sold. This area will also benefit from the geographical diversification (national and inter- national) of Sando as well as the variety and quality of the products offered. As for Sando’s portfolio of Real Estate, while excessive for the current situation, 96.25% of the total value is urban land, rural Real Estate accounts for 9.5 million Euros and land currently in classification amounts to 27.1 million Euros, for a total portfolio value of 974.5 million Euros.
The continuity of operations and the maintenance of profitability and financial solvency are gua- ranteed based on the following:
• As of December 31, there is an ample portfolio of orders for a total of 1,370 million Euros (up 46% from the previous year), which supposes 2.5 years of ensured production based on Construction area sales dring 2007. • The Construction area has pursued a policy of prudence with regard to the recognition of Pro- duction corresponding to non-firm contracts. • The Real Estate division has an ample reserve of strategic Real Estate as well as an adequate geographical diversification.
The company has undertaken a significant project for the redesign of its management systems, ba- sed on an IT application which will allow improved and increased information for the management of its activities and future decision making, thus consolidating the growth experienced in recent years and preparing the company for a new expansive cycle. This project will also benefit from the creation of a new Internal Auditing department and the development of a Department of Planning and Management, as well as other significant actions designed to reinforce operational areas and their support.
The average number of personnel in 2007 was 2,012 employees, with a total of 2,417 at the end of the year including UTEs.
24 the company
The company continues to advance in the diversification of its business activities, making a decisive effort in the Construction area and in the exploitation of administrative Concessions.
Technological activities
During the course of 2007 Sando presented the Corporación Tecnológica de Andalucía (CTA) with two significant research and development projects, in partnership with the University, which were approved and will finalise their viability phase during the course of 2008. With this, and the intensifi- cation of the transversal policies of the human Resources department, Sando continues to pursue it strategic vision for future development.
San Pedro - Colmenar Viejo Tunnel
25
management report 07sando
Malaga Provincial Government
28 construction
The Construction division of Sando has constituted the principal activity of the company, both for its track record as for its volume of turnover as it accounts for over half the income of the group.
It is principally from this area that civil engineering and construction projects are carried out both for public administrations, at the state, autonomous community or local level, and private clients.
A wide range of projects are executed throughout Spain and in Poland, including motorways, railway lines, port and airport installations, large scale hydraulic projects and supply infrastructure, water treatment and desalination.
Year Production Gross margin % Structural costs Net margin
2005 279.971 26.606 9,5 % 4,2 % 14.943 5,3 % 2006 452.261 44.294 9,8 % 4,3 % 24.874 5,5 % 2007 585.352 55.760 9,5 % 3,7 % 33.850 5,8 %
Amounts in thousands of euros
Vision
To become a national and international leader in the Construction sector executing large scale pro- jects with the highest official qualifications with a human and material resources of the very highest calibre promoting the sustainable development of society.
Armilla (Granada) Underground parking lot
29 management report 07sando
Mudéjar-Calamocha-Romanos Motorway
30 construction
Organigram
31 management report 07sando
Activity by geographical area
The Construction area is active throughout Spain where it has six main offices and in Poland where headquarters are located in Warsaw.
N W
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Warsaw
POLAND
Madrid Barcelona Extremadura Valencia Sevilla Malaga
Puente Genil-Herrera AVE station
32 construction
Licenses
During 2007, the Construction area in- creased the total sum of its licensed and contracted projects:
Summary of Licensing - Contracting
2003 2004 2005 2006 2007 Total licensed VAT not incl. 6.746.445.323,36 4.654.995.125,88 6.533.065.168,60 8.062.138.044,03 10.910.833.333,58 Total contracted VAT not incl. 228.235.167,07 398.090.936,25 354.593.794,29 447.901.185,52 634.593.028,64 % of contracting of licensing 3,38% 8,55% 5,43% 5,56% 5,82% Average total of contracted projects 6.949.865,75 11.169.168,15 10.370.698,63 10.557.258,44 7.645.699,14
33 management report 07sando
Principal clients
Ministries: • Public Works • Environment • Agriculture, Fisheries and Alimentation • Housing
Autonomous Communities: Albacete-Montesa pipeline • Government of Galicia • Government of Andalucía • Government of Extremadura • Government of Castilla–La Mancha • Community of Madrid • Community of Castilla y León • Region of Murcia • Government of Valencia. • Government of Cataluña • Government of Gibraltar Malaga Airport terminal • Basque Government
Other: • Municipalities (Madrid, Malaga, Sevilla, etc.) • Provincial Governments • Universities • Private E.T.S. of Industrial Engineers (Malaga)
Mudéjar-Calamocha-Romanos Motorway
34 construction
La Rosaleda football stadium. Malaga
Evolution of Production
Contracting by type of project
Total contracting % contracting Type O. Civil + Edif. (VAT not incl.) s/total contracted
Hydraulic projects 115.748.672,08 18,24% Housing 95.037.811,61 14,98% Singular constructions 90.581.573,43 14,27% Airports 85.442.229,84 13,46% Roadways 77.907.725,16 12,28% Developments 75.065.189,83 11,83% Railways 48.136.019,03 7,59% Gas pipelines 24.034.750,82 3,79% Sports facilities 10.535.335,93 1,66% Special projects and conservation 6.840.835,92 1,08% Ports 5.262.885,02 0,83% Total contracted 634.593.028,66 100,00%
Evolution of the Portfolio
The project portfolio will guarantee the current rhythm of production for the next 20 months.
35 management report 07sando
Technical capacity. Resources
The year 2007 saw the continuation of the contracting strategy undertaken in previous years which has once again produced positive results, similar to previous years.
The resources dedicated to the IT department have been maintained, in power and ca- pacity, permitting the presentation of numerous reports, files and documentation to the various organisations to which the Construction department must submit licenses. A total of over 667 projects were studied during 2007.
In April of 2007 the department of Technical Services was created in order to provide con- sulting services and technical support for the Production and Contracting departments at all levels.
The goal of the department is to contribute to meeting the following company objecti- ves:
• Optimisation of solutions to enhance the financial results of the projects. • Improved project quality, preventing pathologies, problems of structural insecurity, etc. • Reinforce the image of Sando as a company providing technically advanced and qua- lity products and services.
The most frequent types of actions are the following:
• Analysis of adjudicated project and the study of possible modifications. • Pathologies. • Technical support for services for third parties: - Administration or Real Estate - Engineering - Sub-contractors • Revision of structures to be built. • Various consulting services.
At the end of the year, a new figure was incorporated into the department who will participate all areas related to project planning under the direction of the Civil Projects Production and Edification departments. Siete Aguas. Buñol tunnel
36 construction
37 management report 07sando
Organisational capacity. Human resources
The year 2007 saw an increase of almost 30% in the staff of professionals to order to meet the growth of production in both the areas of civil projects and edification. In this way the new organigram has been consolidated with the incorporation of new departments and directors:
Siete Aguas-Buñol section of the AVE Madrid-Levante
• The Department of Production has been divided into two new areas: Civil Projects and Edification. This modification will help improve operability and better attend the strong growth of the com- pany. • The area has created a department of Technical Services with four specialities: installations, structu- res, underground projects and technical planning.
38 construction
• The Department of Contracting and Studies has been reinforced with the incorporation of additional personnel in the Edification Studies Department and has completed the organisation of the Admi- nistration Department. • After the purchase of Agofer, the construction department of this company was fully integrated into that of Sando. • The Polish office has established a Technical Department for Edification and another for Civil Pro- jects.
Furthermore, the Human Resources department has undertaken two significant projects:
• The Training Plan has been finalised with the giving of courses to management, professional teams, project managers, production personnel and managers. • A complete evaluation has been made of the performance, competencies and potential of the va- rious work positions and this evaluation systems continues to be implemented through the ERP by META 4.
Melonares dam
39 management report 07sando
International presence
The Construction department established a solid presence in Poland during 2007. With the neces- sary resources, it has created the basis for the execution of large scale projects both for the public administration and private initiatives, without overlooking the importance of public infrastructu- re concessions within the sector.
The construction department is operating in Poland through the company Sando Budownictwo Polska which has the organisation and preparation necessary to establish Sando’s Production and Quality processes in Poland.
Poisadoiro Tunnel
40 construction
Objectives 2008
• To continue to increase company turnover, reaching production figures of 640 million Euros with earnings of 35.2 million Euros. • To increase contracting to 700 million Euros. • To maintain and increase the market share in the two regions where Sando is historically present: Andalucía and Madrid. Both for projects with the autonomous governments and municipalities, administrations, decentralised organisms and private entities. • To consolidate the presence of the company in the Communities where Sando is now operating, especially in Castilla y León, Aragón, Castilla la Mancha, Galicia, Valencia and Extremadura.
Poisadoiro Tunnel
41 management report 07sando
Notable actions
Albacete-Montesa pipeline
Ahijones collectors, El Cañaveral development, Madrid.
Torres de Hércules, Cádiz.
42 construction
“Carlos Ruiz” Sport facility, Pozuelo de Alarcón, Madrid.
Trujillo-Cáceres motorway. Santa Marta de Magasca-Cáceres section.
General construction of installations in Mairena del Aljarafe, Sevilla.
43 management report 07sando
La Plata motorway. Santa Olalla section.
Campo de Dalías desalination plant, Almería.
Expansion of the airfield and second landing strip, Airport of Malaga.
Construction of 240 homes in Torrejón de Ardoz, Madrid.
44 La Plata motorway. Santa Olalla section.
Introduction Vision Organigram Activity by geographical area Business areas Real Estate Promotion Real Estate Management Patrimony Projects in development Organisational capacity. Human resources Objectives management report 07sando
Blau Cell. Cataluña
48 real estate
The activity in the Real Estate division has seen constant growth since its beginnings during the early 1980’s.
The year 2007 saw a qualitative jump in the history of this division with the acquisition of the com- pany Agofer in the month of April. This operation represents a significant expansion into the central region of Spain, Cataluña and the Levante as well as the consolidation of its position in Poland where the two companies were operating.
The magnificent results obtained by the company in recent years combined with an appropriate financial policy allowed the company to perform this operation and close the year 2007 with an ex- cellent financial position with low debt levels. This purchase has provided a significant increase in the asset value of the real estate portfolio, which totalled 3,136 million Euros as of December 31, 2007.
Turnover increase 64%, reaching 260 million Euros. Operating revenues topped 80 million Euros, with a posted annual pre-tax profit of 28 million Euros.
Vision
The Real Estate division has based its business model and strategy on becoming an international di- versified company increasingly focussed on asset accumulation and with the objective of profitable growth through the rotation of assets and the development of value added projects.
The area bases its strategy on the following series of values which are considered the pillars of the company:
• Ensure client and supplier satisfaction. • Generate added value for the shareholders. • Create an attractive work environment for the professional and personal development of the em- ployees. • Foment a culture of respect for the environmental and responsible and sustainable business prac- tices. • Enhance corporate culture incorporating the values which govern the behaviour of persons and guide the company in achieving its goals.
49 management report 07sando
Organigram
Activity by geographical area
Geographical diversification represents one of the key elements of Sando’s strategy. The year 2007 saw the termination of a double process: the increase in national expansion with offices in Cataluña and Valencia and expansion to Eastern Europe with the penetration of the Hungarian market and the start of an implementation process in Romania.
The area currently has five Territorial Offices in Spain: Eastern Andalucía, Western Andalucia, Cataluña, Central and the Levante. There are also offices in Poland and Hungary.
The early months of 2008 saw the first investment in Hungary with the acquisition of a parcel for a value of 3 million Euros for the development of a 262 home project in the city of Budapest.
The company is constantly studying the possibilities to enter into new markets in eastern Europe, ei- ther through the acquisition of urban properties to promote tertiary business and enhance holdings or through the purchase of land for future promotions.
50 real estate
N W
E
S
Warsaw
POLAND
Budapest HUNGARY
Madrid Barcelona Extremadura Valencia Sevilla Murcia Malaga
Business areas
The Real Estate activity is divided into three Contribution to profits by Activity business areas:
• Real Estate Promotions. • Property management. • Patrimony.
Contribution of each business area to opera- ting profits in 2007:
51 management report 07sando
The comparative figures for the last two years by business area are the following:
2007 2006
Residential promotion Sales 181.083 81.522 Land Sales 69.101 74.582 Patrimony and Tertiary Income 3.248 1.277 Other 6.502 1.474
Total Income 259.934 158.855
Total operating costs 161.969 92.228
GROSS MARGIN 97.965 66.627
Structure costs 17.916 6.254 E.B.I.T.D.A 80.049 60.373 Amortisation and Provisions 3.670 6.730
E.B.I.T 76.379 53.643
Financial costs 48.601 13.132
Ordinary earnings 27.778 40.511
Extraordinary earning 88.308
PRE-TAX EARNINGS 27.778 128.819
Figures expressed in thousands of Euros.
Urbanización Spacio. Mairena del Aljarafe (Sevilla)
52 real estate
Premiá de Dalt. Cataluña
Real Estate Promotion
This business line is focussed on the development, design and commercialisation of homes on pro- perties previously acquired by the company. Sando has centred its strategy on the client, paying close attention to product quality and compliance with termination dates and the commercial sales budgets.
Housing starts, constructed and sold
The recent increases in the Eurobor, the uncertainty of the economic situation and the sub-prime crisis have led to a fall in demand in the final months of 2007; a situation which is particularly acute in the second home sector in coastal areas.
53 management report 07sando
Estimations for 2008 call for a drop in activity in Spain due to Evolution of housing starts 2005-07 / Forecast 08 the reduction in production. The department will develop the new promotions which have a proven demand, adjus- ting the activity to the current markjet conditions.
In Poland and Hungary the number of initial units will in- crease to 1,711 homes, although their sale value is reduced as a result of lower unit prices.
Evolution of sales
The Real Estate area achieved excellent commercial results in 2007, increasing the number of units sold from 382 in Turnover housing starts 05-07 / Forecast 08 2006 to 487. The value of sales saw an increase of approxi- mately 80%, from 101 to 181 million Euros.
During this year the department achieved its goals of na- tional and international expansion, initiating commercial activities in Poland and, as a consequence of the acquisition of Agofer, established Territorial Offices in Cataluña and the Levante.
Promotions
The Real Estate area enjoyed an increase of 117,81% in the Evolution of contracting number of promotions under management, topping 3,733 units with a total value of over 1,022 million Euros, an increa- se of 176.45%.
The chart below provides the most representative figures for the current promotions:
54 real estate
Code Province Promotion Units m2 Total 1 Malaga Commercial building (rent.) 23 0 1 Malaga Parque Resid. Bezmiliana 3ª Phase 16 3.224 1 Malaga El Casar Residencial 21 5.666 1 Malaga Parque Resid. Bezmiliana 5ª Phase 36 5.897 1 Malaga Residencial Calazul 60 6.243 1 Malaga Commercial building 50 6.752 1 Malaga Regidor Hills 41 6.984 1 Malaga Edificio Auditorium 59 7.009 1 Malaga Residencial Novomar 52 7.251 1 Malaga Finca Lantana 37 8.158 1 Malaga Edificio Libra 74 8.753 1 Malaga Calablanca 104 10.259 1 Malaga Parque Resid. Bezmiliana 4ª Phase 91 12.988 1 Malaga Residencial Alazán 100 15.417 1 Malaga Residencial Pleamar 1ª Phase 105 17.303 1 Malaga Residencial Pleamar 2ª Phase 105 24.973 2 Cadiz Residencial Mesana 1ª Phase 44 9.017 2 Cadiz Residencial Mesana 2ª Phase 56 14.187 3 Sevilla Residencial Spacio 34 8.724 3 Sevilla Residencial Tempo 56 9.848 3 Sevilla Alcalá Futura III y IV Phase 54 12.152 3 Sevilla Alcalá Futura 1ª y 2ª Phase 50 12.493 4 Madrid Edificio Casal 38 5.201 4 Madrid La Cañada 43 6.543 4 Madrid Residencial Europa 32 9.960 4 Madrid Vistas de Henares 82 10.572 4 Madrid Residencial Quarzo 172 10.620 4 Madrid Edificio Ayala 97 21.412 4 Madrid Arpegio 14 235 21.871 4 Madrid Princesa de Éboli Phase II 181 29.811 4 Madrid Gardens of Puentedey 332 32.316 4 Madrid Arpegio 8 240 38.308 5 Barcelona Mirador de Sant Joan 27 3.941 5 Barcelona L’illa Paulina 50 4.766 5 Barcelona Olesa Centre 41 7.481 5 Barcelona Blau Cel 95 9.015 5 Barcelona Resid. Centre de la Vila 86 9.711 6 Alicante Los Altos de la Cala 123 15.682 7 Warsaw (MOKOTOW) Alanda 1ª Phase 149 25.179 7 Warsaw (BEMOWO) Sansara 1ª Phase 386 34.560 TOTAL 3.733 517.485 Nuevo Distrito Santa Bárbara. Sevilla
55 management report 07sando
Edificio Summun. Sevilla
56 real estate
Property Management
The department currently holds a portfolio of 7.9 million square metres of land for development, re- presenting 2.7 million square metres of edification, the equivalent of over 21,700 homes. These figures guarantee over ten years of activity when calculated according to the current volume of sales.
Distribution of Property portfolio
The risk exposure of the property portfolio has reduced in recent years, increasing purchases in urban land. By degree of maturity, some 20% of the portfolio is for short term use, 40% for medium term (1 to 2 years) and the 40% outstanding for long term use (3 to 5 years).
Movements in the property portfolio during 2007:
Totals (thousands €) 31/12/2006 Purchases Promotion Sales 31/12/2007
Urban 271.363 247.924 (106.003) (79.658) 333.626 Development management 445.743 169.576 (4.035) (7.095) 604.189 Land in classification 27.147 27.147 Rural 9.547 9.547 Total 753.800 417.500 (110.038) (86.753) 974.509
(*) Incorporated into the portfolio due to the purchase of Agofer.
57 management report 07sando
The firm acquisitions of property rose to over 224 million Euros, not including the portfolio acquired through the purchase of Agofer. Additionally, purchase options have been formalised for land with a value of over 54 million Euros, in Spain and Poland.
For the year 2008, purchase options for a value of 26 million Euros have been established in Spain and for 28 million in Poland.
Operation by offices in 2007
Zone m2 Land m2 Ceiling Units Purchase value
East. Andalucía Office 14.098 29.738 270 54.879.815 West. Andalucía Office 18.827 23.067 71 22.774.530 Central Office 211.527 45.890 418 92.398.349 Levante Office 14.243 7.413 66 6.120.000 Cataluña Office 19.500 219 35.900.000 Poland 49.583 32.533 452 11.968.530 308.278 158.141 1.496 224.041.224
Public Housing for rental with option to purchase for young persons in Madrid.
58 real estate
Vermera. Warsaw
The following is a list of the most notable acquisitions:
• The purchase of Parque Valdebebas in Madrid of 16,461 m2 of ceiling for the development of approximately 154 homes and 1,046 m2 for commercial or tertiary use. • Various operations have been conducted in Poland. The most significant have been the purchase of land in Karczunkowska, Warsaw, with 143,330 m2 of ceiling for the development of over 2,200 homes and a purchase option in Poznan of the Witosa development, executed in its first phase with 16,200 m2 for edification of a project for 206 units. • The property El Pato was acquired through auction in Malaga, with 15,901 m2 for the development of 153 units. • In Cataluña land was purchased in Tarrasa with 19,500 m2 for edification for a total of 219 units. • Two significant operations have been executed in Sevilla: The acquisition of an emblematic office building for renovation and a parcel in the Parque Empresarial Zaudín of Tomares, with possible edification of 14,311 m2.
Land sales rose to a total of 74 million Euros, with an average gross margin of 26%. These operations are mainly centred in Madrid, Malaga, Sevilla and Poland.
59 management report 07sando
Land purchases by offices in 2007
Real Estate Portfolio as of December 31, 2007:
Type of Land m2 land m2 ceiling Unit. Total Urban land 417.664 520.292 4.009 Total Urban devel. 3.142.906 1.717.554 12.220 Total land in classification 969.332 20.416 457 Total Rural land 2.826.571 0 771 Total rights and exchange 528.255 450.729 4.265 Total Land 7.884.728 2.708.991 21.722
Distribution of land by use
m2 Ceiling Unit.
Industrial and Tertiary 368.909 Free Residential 1ª Residential 1.785.361 16.138 2ª Residential 35.516 389 Public Housing 519.205 5.195 Total 2.708.991 21.722
60 real estate
This distribution allows the company to face the future with optimism, with excellent perspectives sue to the greater weight of first residence properties, a wide geographical diversity, and a greater exposure to property in Poland.
Edificio Summun. Sevilla
Patrimony
The development, rental and sale of its Patrimony is one of the three main business lines of the Real Estate area. These operations are currently in expansion and will prove to be a key activity in the co- ming years.
The company patrimony has seen extraordinary growth in recent years in Spain, although with the expansion of Sando into Eastern Europe, the first operations are now being carried out abroad.
61 management report 07sando
The activities in this area are oriented towards the promotion, purchase and rental of assets with different uses:
• Malls and shopping centres. • Office buildings. • Industrial – Logistics. • Commercial spaces and supermarkets. • Retirement residences. • Public housing (protected) with option to purchase.
Principal Activities during 2007:
• The acquisition of two medium sized commercial centres operated by PC City in Palma de Mallorca and the Megapark shopping centre in San Sebastián de los Reyes (Madrid). The operation totalled 24.8 million Euros. • Progress has been made in the licensing of the development project Nuevo Distrito Santa Bárbara, Sevilla, encompassing approximately 700,000 m2 for commercial, business and industrial activi- ties.
Ballesol Retirement residence
62 real estate
• Renovations were performed in the retirement residences operated by Ballesol in Pasillo Verde and Mirasierra (Madrid) and in Barberá del Vallés (Barcelona). • The Alameda building, with over 3,500 m2 of edification for offices, commercial spaces was initia- ted in the Alameda industrial park of Malaga. • The adjudication of two licences permitting the start of two office buildings in early 2008, one in Madrid and another in Sevilla with 4,000 m2 and 14,000 m2 respectively. • Good sales will permit the initiation in 2008 of two new phases of industrial warehouses in Alcalá de Guadaira, Sevilla, after the termination of the first phases. • In 2007 the urban development process was completed for an emblematic industrial project in Malaga, with over 100.000 m2 and located in the centre of the Costa del Sol. An industrial park will be developed as a key axis for the distribution of merchandise throughout the area. • A significant office project has been started in Warsaw on Chelmska street with five towers and a total edification of close to 40,000 m2, with 12,000 m2 for commercial spaces.
Alcalá Futura. Alcalá de Guadaira. Sevilla
Projects in development
This year saw the initiation of work and the design of eighteen promotions totalling some 1,100 units with an approximate market value of 355 million Euros. These generally encompass different types: re- sidential, tertiary and industrial and are located in Andalucía, Cataluña, Madrid, Levante and Poland.
Sando has created, in partnership with Caja Madrid, the Sociedad Avanza Vivienda Joven, with a stake of 60% whose aim is to promote VPO rental housing (public) with the option to purchase on land adjudicated in Arroyomolinos, Madrid.
63 management report 07sando
64 real estate
Santa Bárbara
One of the most emblematic projects currently being developed by Sando is the Nuevo Distrito Santa Bárbara. A sustainable city located in Se- villa and managed through the DUSE company, In which Sando holds the majority stake.
The Nuevo Distrito Santa Bárbara constitutes the largest urbanisation project in the history of Sevilla and is one of the largest in Spain. It has a total area of over four million square me- tres and has been painstakingly planned to create a unique space which is environmentally sustainable, integrating all public conveniences with excellent transport links and public trans- port with an ample network of open and green spaces for walking. Over 17,000 homes will be built, of which 20% with have some type of pu- blic protection.
This unique space balances the natural envi- ronment with business and residential uses with recreational facilities and green spaces of the highest quality, configured as a city within a city.
Nuevo Distrito Santa Bárbara. Sevilla
65 management report 07sando
Alanda Building. Warsaw
Organisational capacity. Human resources
The company personnel are the principal asset of the Real Estate area, and it is considered of vital impor- tance to meet the needs of company employees. This policy is based on a flexible organisation where the real contribution of personnel is valued, facilitating the integral management of human resources.
The key pillars in this area in recent years have been:
• The careful selection of personnel based on the merit and capacities of the candidates. • Guarantee and promote professional and personal development opportunities in a company in continuous expansion.
66 real estate
• Recruit, motivate and retain the best professionals, offering an attractive work environment. • Continuous staff training where qualifications can be improved.
The work of the Human Resources department deserves special recognition as it achieved the inte- gration of Sando and Agofer personnel resulting from the merger of these areas.
The principal objectives of this process was based on the adaptation of each professional to their work position, assuming the required aptitudes, professional development and motivation.
In addition to the integration of personnel as a result of the merger, the year 2007 saw the incorpora- tion of 41 new professionals with staff levels totalling 135 people as of December 31, 2007.
Blau Cel. Cataluña
67 management report 07sando
Objectives
• The Real Estate area forecasts growth of 77% in total turnover for 2008. It estimates an increase of 78% in Real estate promotions, 75% in property management and some 64% in income from rentals and leasing. • Commercial sales estimates for the year 2008 stand at 894 units with a contractual value of 243 million Euros. The estimated evolution with regard to previous years is as follows:
Turnover Earnings
Real Estate division forecast for 2008 410 MM € 42 MM €
• Investment operations will be undertaken according to the opportunities available in the market, properties with optimum location and profitability and investment projects for assets to consoli- date the rental business line. • The area will carry out operations on properties which, after detailed study, fit with the company’s growth strategy and can be acquired for optimum prices. • Geographically, future investments will be fundamentally focused on acquisitions in Spain Poland and Hungary.
Evolution of contracting 2003-07. Forecast 08
68 real estate
Edificio Libra. Málaga
Gardens of Puente del Ensanche Vallecas. Madrid
69
MATERIALS AND SUPPLIES division
Introduction Vision Organigram Organisational capacity. Human resources Activity by geographical area Business areas Investments Quality New Projects Objectives management report 07sando
72 materials and supplies
The Materials and Supplies division is principally dedicated to four activities related to the supply of materials for the construction sector and public works, both for Sando infrastructures and for external clients:
• Extraction, treatment and commercialisation of áridos. • Production and commercialisation of cement and mortar. • Production of agglomerate and project execution. • Transport activities.
All of these activities are managed from two offices: Eastern Andalucía, in Malaga, and Western Anda- lucia in Sevilla.
Vision
The Materials and Supplies division considers the supply and transport of materials as strategic ac- tions subordinate to the construction activity, aiming to provide top quality materials and ensure the supply and transport in optimum conditions, meeting established timetables, environmental norms and quality standards.
This division dedicates a great deal of effort to R&D+I projects which combine sustainable develop- ment and environmental responsibility while rigorously complying with workplace risk prevention standards.
Materials loading. La Cabaña. La Rinconada (Sevilla)
73 management report 07sando
Organigram
Organisational capacity. Human resources
Since the end of 2004, the area of Materials and Supplies has been carrying out a process of moderni- sation of its installations and organisation in order to optimise the use of resources, moving towards a more sustainable management model. This process will establish a more solid and efficient structure with a more stable, less temporary, staff.
Jan-07 Dec-07 Materials and Supplies Fixes Future Fixed Future
Subtotal 232 251 271 169 Total 483 440
74 materials and supplies
Activity by geographical area
Andalucia is the principal area of activity of this division, with Jaen and Almeria being the only pro- vinces where it is not present.
Location of the various centres by office and activity.
Business areas
Extraction, treatment and commercialisation of aggregates
The division has a total of eleven facilities, two of which are gravel pits and the rest quarries. The area of influence encompasses almost the entire region of Andalucia. The material obtained for the gravel pits is silicon; while the quarries primarily produce limestone, with the exception with the quarries of Lora del Río, Mijas and Ronda producing granite, dolomite and limestone-dolomite, respectively.
75 management report 07sando
In 2007, the volume of materials sold topped 10,277,881 TM, with a total value of 57,192,629 Euros.
The principal infrastructure projects supplied by the division:
• Esclusa Sevilla (UTE Esclusa). • Las Cruces Copper Mine (Ferrovial). • Carmona-Brenes Motorway (Sando). • Palma-Córdoba Motorway (UTE Anci-Maygar). • Airport of Malaga (Sando). • Port of Malaga (UTE Dragados-Sando). • Renovation of the avenue María Zambrano (Sando).
Agglomerate plant Mairena del Alcor (Sevilla)
Production and commercialisation of cement and mortar
In total, the Materials and Supplies division has fifteen cement and mortar factories, three of which are mobile. During 2007, total volume of sales reached 1.246.820 m3, for a total of 63,450,874 Euros.
76 materials and supplies
Specialisation in this business line allows the company to manufacture different types of cement according to the needs of the client and the specific properties required by the materials. Sales depend on the type of environment in each geographical region and, as a consequence, the type of cement and its content in cubic metres.
Coastal regions and areas within 5 Km are considered aggressive environments and the resistance is in- creased to 30 N/mm2 with cement content superior to 325 Kg. /m3. Foundations are often affected by the chemical aggression and require the use of special cements.
Cement factory in Vélez-Malaga (Malaga)
77 management report 07sando
The most significant projects in which the division has participated include the following:
• Promotion of 500 homes in Santa Margarita, La Línea, Cadiz (Sacyr). • UTE EDAR los Palacios (Sando–Joca). • UTE Law and Work Sciences Faculties Sevilla (Sando–Ferrovial). • UTE Mairena del Aljarafe station (Sando–Inabensa). • Construction of the Torres de Hércules in Los Barrios, Cadiz (Sando). • Burying of the AVE to Malaga (UTE Enma-Sacyr). • Construction of the Malaga Metro (UTE Sando–FCC–Vera–Comsa-Azvi). • New terminal of the Airport of Malaga (UTE Sando-Ferrovial).
Production of agglomerate and project execution
Agglomerates are currently produced in three plants with the total volume of sales in 2007 reaching 477,355 TM, for a total of 17,920,610 Euros.
Hot bituminous mixtures, between 140 and 170 degrees centigrade, are considered asphalt agglome- rates. These are used for roadway surfaces, parking lots, airport runways, way-stations, cross walks and any areas which require a flexible surface material.
For the roadway construction and conservation, the division has five teams for laying and rolling and two patching teams. These teams are generally centred in the La Cabaña facility in Sevilla, and the plants of Alhaurín de la Torre and Ronda.
Asphalt spreaders
78 materials and supplies
Some of the most significant operations in 2007 included:
• Resurfacing SE–30 y SE-020, Sevilla (Ministry of Public Works). • Urbanisation El Esparragal de Guillena, Sevilla (Sacyr). • Remodelling of the Avenida María Zambrano (Sando). • N-433 motorway (Ministry of Public Works). • Parking lot of the Malaga Airport (Acciona). • Expansion of the motorway between Cártama–Casapalma, Malaga (UTE Corsan–Corviam y Guamar).
Transportation activities
The Materials and Supplies division has a fleet of transport vehicles consisting of a total of 60 tractor trailers with their corresponding trailers. The operation of these vehicles is complementary to the activities of the division, providing strategic support for the commercialisation of áridos.
The 7,500,000 Km. travelled by the transport fleet in 2007 gives an idea of the volume of this part of the Materials and Supplies division. Total sales for topped 18,819,110 Euros.
Dump truck fleet
79 management report 07sando
Investments
The year 2007 saw the completion and inauguration of new premises of the Eastern Andalucia office in La Rinconada in Sevilla. These modern and practical installations represent an investment of 1.4 million Euros.
Extraction, treatment and commercialisation and aggregates
With an investment of close to six million Euros, a new mill and aggregate classification plant was completed in La Ventilla, in Ronda, Malaga.
Furthermore, six new Komatsu, HD465 dump trucks where purchased, an investment of 3 million Euros.
Production and commercialisation of cement and mortar
In this line a second plant was installed in the La Cabaña facility in Sevilla, for 70,000 Euros and existing production facilities were refitted for a total of 124,000 Euros.
Production of agglomerate and project execution
New agglomerate equipment was acquired, including an extender, a tandem roller, a compactor and two manual rollers as will as a joint hammer, for the sum of 346.000 Euros.
Transport activities
The division invested a total of 690,000 Euros in the purchase of ten Mercedes Benz trucks.
For the year 2008, investments have been approved for a total of 6.8 million Euros in order to ensure continued levels of quality. These investments are earmarked for the modernisation of the machinery, optimisation of transport through the substitution of 46 tractor trailers and improvement of various infrastructures.
80 materials and supplies
Quality
Quality constitutes a key element in the philosophy of Sando applying the Quality and Production Control Manuals implemented in the various companies of the group.
During the year 2007 the following certifications were obtained:
• Within the area of extraction, treatment and commercialisation of aggregates, the number of frac- tion and uses with CE Certification has been expanded. In 2005 the bases were established to extend the Company Register ER in El Troconal, to the facilities of Dolomitas, El Trabuco, Gloria and La Cabaña, achieved in 2006 and maintaining this objective in 2007. • Regarding the production and commercialisation of cement and mortar, this maintained the CE Certification of Masonry in the plants of Fuengirola, Granada, Dos Hermanas, La Cabaña, Malaga, Marbella, San Roque and Vélez Malaga. Additionally, the plants of Dos Hermanas, Malaga, Marbella, La Cabaña y San Roque remain in the Company Register ER. • With regards to the production of agglomerate and project execution, 2007 saw the start of the Certification process for Bituminous Mixture Plants to obtain the CE certification within the esta- blished period.
Aggregate plant La Cabaña. La Rinconada (Sevilla)
81 management report 07sando
New Projects
The Materials and Supplies division, in the process of reorganisation, has undertaken projects to achieve established objectives and implement management systems which provide reliable data for strategic decision making. These projects include:
• Creation of the Organigram, detailing each work positions and their functions, responsibilities and dependencies. • In the face of the need to obtain reliable data for decision making, a department of Cost Control, Budget and Investment Analysis and Oversight was created. This department works in co-ordina- tion with the Corporate division through a new CIS (Corporate Information System) management tool. • Co-ordination project with the Human Resources department for personnel policy, training plans and IT oversight. • Start-up of a project with the Risk Prevention Service to regulate current Safety Plans, organise monthly meetings with the heads of each of the centres. • To make directors responsible for the application and compliance with the General Mining Safety Norms, Complementary Safety Instructions and the Internal Safety Regulations for mining opera- tions in accordance with I.T.C. 02.0.01, article 3.2.1. of the Ministry of Industry.
Objectives
• To achieve the production and sales targets indicted below for each business line: • Extraction. Treatment and commercialisation of aggregates. Estimated sales are 9,000,000 TM for a total of 38.75 million Euros (transport not included). • Production and commercialisation of cement and mortar. Estimated sales of 1.040.000 m3 for a total of 54.50 million Euros. • Production of agglomerates and project execution. Sales of 446,800 TM are forecast for a total of 15.66 million Euros. • Transport activity. Total turnover is estimated at 18.85 million Euros. • Diversify, look for new business areas together with geographical expansion of existing opera- tions.
Levelling processes using laser.
82 materials and supplies
83
ENVIRONMENT division
Introduction Vision Organigram Investments Business areas Evolution of la Production Evolution of Portfolio Quality Organisational capacity; Human resources New Projects Objectives Notable actions management report 07sando
Activities in Villaverde (Madrid)
86 environment
The growing awareness and concern about the environment led Sando to introduce environmental considerations into all its production and management processes, incorporating it into its economic activities by creating a specialised division for environmental services and projects.
The division has become a strategic area within Sando’s diversification process, with a marked geo- graphical expansion throughout Spain and more than thirty years of experience in the sector. The Environment division operates primarily through the Althenia company.
Vision
The goal of the Environment division is to contribute to the sustainable development of modern so- ciety, providing technology, expertise, know-how and the resources to undertake all types of projects, services and maintenance related to the environment and urban services.
In this area, special attention is paid to gardening and landscaping activities, forestry projects and main- tenance, irrigation systems and efficiency enhancement; roadway and interior cleaning and maintenan- ce, waste collection, transport, treatment and separation; integral water management, hydraulic correc- tion, waste water treatment, potabilisation and desalination systems, plumbing and sewage systems.
Organigrama
87 management report 07sando
Investments
The activities and services provided by the Environ- ment division during 2007 required an investment of over one million Euros.
Within this chapter, four significant investment have been undertaken:
• Cleaning and maintenance of the beaches of Ca- diz, for 380,000 Euros. • Cleaning and maintenance of facilities and equi- Forestry cleaning in Fontanarejo (Jaén) pment on the beaches of Malaga, for 100,000 Euros. • Cleaning services in La Cartuja, Sevilla, for 150,000 Euros. • Garden conservation services in Cabanillas del Campo, Guadalajara, for 180,000 Euros.
Business areas
The activities of the Environment division are divi- ded into three independent but complementary business areas which offer complete environmental Waste management in Chipiona (Cadiz) services.
• Gardening and Forestry • Waste management • Water management
The first two areas encompass activities and main- tenance operations while Water management is the area in expansion and where the majority of inves- tment will occur in 2008.
Waste collection and management in Vélez-Malaga (Malaga)
88 environment
Evolution of Production
In recent years, the growth experienced in this area, as a consequence of the geographical and busi- ness expansion, has permitted an increase in production of some 135%. With growth in 2007 reaching near 25%, up to 25 million Euros.
Waste management services has experienced significant growth in the last year, approaching the bu- siness line of Projects, both in terms of production and gross margins, achieving a greater equilibrium between the three business areas.
Evolution of Production
Business areas
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Parque de los Príncipes (Sevilla)
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The Environment division is focused on the area of waste management without overlooking growth opportunities in other areas.
Evolution of Portfolio
As with Production, the portfolio of the Environment division has grown to reach 114 million Euros. The significant territorial and business expansion, together with a well defined strategic planning, has enabled this achievement; more focused on the central regions of the country where an increase of 200% was achieved.
The most significant achievement is once again territorial expansion, consolidating its presence in Andalucía, Extremadura, Madrid, Castilla-León and Castilla La Mancha.
Volume of adjudicated projects and Portfolio
The existing portfolio guarantees, at the current rate of production, 4.5 years of activity. The majority of this is contracted in long term projects until the year 2020. This situation favours the sustainable growth of the company with stable and lasting relationships with clients and society as a whole.
Quality
Sando embraces Quality as a decisive competitive factor for success and the key to the consolidation of new clients and markets. During 2007, the Environment division has maintained its ISO-9001 Qua- lity and 14001 Environmental Management certifications.
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Environmental restoration of the Iberdrola plant in Puertollano
Organisational capacity
Throughout 2007, the structure of the division has been consolidated by Regional Offices, which has permitted the division to meet its objectives in territorial expansion and the consolidation of all business areas.
The management of an average staff of 400 persons, the majority specialists, has required the imple- mentation of the Continuous Training Plan, ensuring that personnel are fully qualified and knowled- geable about the latest technology necessary for each position.
New Projects
The year 2007 saw the initiation of numerous projects, the most significant of which are the fo- llowing:
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Central Zone
• Rehabilitation project of green areas in Parla, Madrid. • Restoration of green areas in Villanueva de la Cañada, Madrid. • Environmental restoration of the Iberdrola Plant in Puertollano, Ciudad Real. • Conservation services for green areas in Cabanillas del Campo, Guadalajara. • Conservation of Natural Spaces in Ávila, in UTE.
South Zone
• Waste collection and maintenance of the beaches of Cadiz. • Cleaning services on the Isla de La Cartuja, Sevilla. • Conditioning of the Guadalquivir River in Andújar, Jaén. • Centre for Endangered Species in Sanlúcar la Mayor, Sevilla. • Restoration of burned areas in Cazorla, Jaén. • Conservation of the Parque Cantarranas in Linares, Jaén. • Maintenance of green zones of the Parliament of Andalucía, Sevilla. • Conservation of green zones of the Airport of Malaga. • Improvement of forested areas in the Comarca de la Vera, Cáceres.
Fontanarejo. Montes consorciados de Jaén
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Objectives
• Forecasts for 2008 estimate production of 27.5 million Euros and pre-tax operating revenues of 2.15 million Euros. • Growth of 15% of the business. • Consolidation of the Central zone, with special interest in waste management contracts and ex- pansion of activities in the North zone. • Increase of Production and Portfolio in the area of Waste management as a guarantee of stability in the long term. • Penetration in the Water area, with maintenance and exploitation contracts. • Intensification of professional training in this area, especially in contract management (technical and administrative), purchasing and subcontracting, Quality and risk prevention. • Strategic alliances with other companies in the sector, achieving greater market and product pe- netration and exploiting synergies. • Adaptation to applicable legislation, with special focus on workplace risk prevention and subcon- tracting. This is a firm contribution to reduce workplace accidents and improving working condi- tions and safety for Sando personnel, subcontractors and partners. • Encouragement of a culture of research, development and innovation as an indispensable means for the development in the area and to guarantee quality, service and security of projects for clients.
Restoration of burned areas ing Cazorla (Jaén) 94 materials and supplies
Notable actions
Roadway cleaning and waste collection in Chipiona, Cadiz.
Roadway cleaning and waste collection in Vélez-Malaga, Malaga.
Cleaning and waste collection on the beaches of Cadiz.
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Conservation and restoration of green areas in the West of Malaga.
Camino del Saucejo development, Osuna.
Roadway conditioning in the province of Jaén.
96 materials and supplies
Conservation and restoration of green areas in Sevilla. (Parliament of Andalucía)
Parque Central de Algete. Madrid
Planting and maintenance Soto de Henares. Torrejón, Madrid.
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Hydraulic restoration project in Ranillas river and environmental conditioning of Parque Tamarguillo, Sevilla.
Conservation and restoration of green areas in Rincón de la Victoria, Malaga.
Montes consorciados de Jaén. Dehesa del Guadiana
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management report 07sando
Metro station, Malaga. (Preliminary info-graph)
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Through the Concessions division, Sando has diversifies its activities with the operation of transport infrastructure (motorways, metros, trams, parking lots, etc), social infrastructure (hospitals), the de- velopment of tertiary property (commercial centres, hotels, office buildings); in addition to a specific business line for the management and promotion of renewable energies.
The strategy of the division is to optimise the resources invested in the portfolio projects, maintaining the rhythm of growth in the area of Concessions and expanding activities and the geographical areas where Sando is present. In 2007 agreements were reached with strategic partners in Mexico and offers were presented of transport infrastructures.
At the close of 2007, the division had turnover of 5,588,290 Euros, an increase of 146% over figures from the previous year. Additionally, EBITDA results was 2,594,440 Euros, that is, 46,4% of turnover, achieving the objectives established by Sando.
Vision
The goals of the division are to develop projects under the various models of public-private partner- ship where there is an opportunity to provide the technical and economic capacity, expertise and professionalism which has been a hallmark of the Sando group for over thirty years in the sector.
Licenses
The Concessions division presented offers before various public administrations during the course of 2007, opting for both management and construction / operational contracts for more than 4,000 parking spaces and railway infrastructure, primarily for the Community of Madrid. Internationally, the division also presented a tender for a motorway concession in Mexico.
This year saw a substantial effort to participate in tenders from the Ministry of Public Works for the adjudication of concession contracts for the maintenance and operation of major motorways deve- loped during the 1980’s.
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As a result of this effort, the final quarter of the year saw the adjudication of the tender for the Main- tenance and Operation of the A-4 motorway section: Puerto Lápice - Venta de Cárdenas in favour of the concessionary Autopista de la Mancha, in which Sando is a leading shareholder.
Project Conservation and exploitation contract for the section Puerto Lápice - Venta de Cárdenas, A-4 Motorway (Ciudad Real) Organism Ministry of Public Works Investment 131.933.064 € Adjudicated Autopista de la Mancha (Sando 23,5%)
Sando continues to participate in Project licensing for infrastructure concessions of singular buildings. A proposal was presented for the parking lot of the Antigua Estación de San Bernardo in Sevilla, which includes, in addition to construction and exploitation of parking lots, the exploitation of commercial areas and the rehabilitation of public buildings.
Parking lot Paseo de la Victoria. Malaga
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Vélez-Malaga tram (Malaga)
Principal concessions
The portfolio of the division is currently composed of twelve projects supposing an aggregate inves- tment of approximately 300 million Euros. Only seven of these projects are currently under operation and none of them date back more than five years since their start-up. Considering that the average life span of the portfolio as a whole is established in 35 years, these are in their initial stages of deve- lopment.
This fact, combined with the general characteristics of the concessions business: the need for an ini- tial period of maturity of the project and larger initial financial loads, explains why the weight of the division in the results of Sando is limited and the balance of the business has been negative during the last three years.
The activity of the contracts portfolio at the end of 2007 can be divided into the following:
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Parking lot construction and management projects
The division currently has more than 4,000 parking spaces under management, of which approxima- tely 1,600 are in operation. The objective is to achieve new projects and to expand the geographical area of operation. This business line consists of:
• Parking lot Paseo de Colón (Sevilla). • Parking lot Hospital Virgen del Rocío (Sevilla). • Parking lot Paseo de la Victoria (Córdoba). • Parking lot Llano de Torroba (Rincón de la Victoria, Malaga).
Railway infrastructure construction and management projects
One of the fundamental aspects of the division is the participation in contracts which include not only the construction of railway infrastructure but the providing of transport services by metro or trams. Within this business line the division manages:
A-4 motorway
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Hospital del Tajo
• The Vélez-Malaga tram, the first project of this type inaugurated in Andalucía. • Malaga Metro, under construction.
Motorway construction and management projects
This line includes two large scale projects:
• The participation in the concessionary Autopista Madrid-Toledo, in exploitation since 2006. • Contract for the maintenance and exploitation of the A-4 motorway, section Puerto Lápice–Venta de Cárdenas, adjudicated to the concessionary Autopista de la Mancha.
The goal of Sando is to strengthen its position in this sector.
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Healthcare infrastructure construction and management projects
Within this business line, the division forms part of the concessionary Hospital del Tajo in Aranjuez. This project is the result of the Healthcare Infrastructure Plan 2005-2007 of the Community of Madrid and which includes the construction and operation of a hospital with over 100 beds.
The hospital became operational during the course of the final quarter of 2007, complying with its commitments to the public administration.
Special construction and management projects
In accordance with Sando’s diversification strategy, the division is present in projects which inclu- de the construction and later operation of singular constructions where the business of tertiary or service-sector buildings plays a fundamental role.
Two projects area included in this category:
• Transport station from Line 1 of the Sevilla Metro. • Biomedicine Institute of Sevilla (Rosa Amarilla project).
Biomedicine institute of Sevilla
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Renewable energy and conservation projects
This business line is established within the framework of Sando’s Corporate Social Responsibility Policy, through the management of projects which promote environmental conservation.
Since 2006, the division has operated a solar FV farm with an installed capacity of 500 KW in La Rinco- nada, Sevilla. This plant will be expanded in the short term and will be reinforced by other renewable energy projects, currently under study.
Solar FV plant. Finca La Cabaña. La Rinconada (Sevilla)
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110 concessions
Current Projects
Contract Concession period Object % stake
Parking lot Paseo Colón (Sevilla) 75 years 535 spaces 100% Parking lot Hospital Virgen del Rocío (Sevilla) 50 years 678 spaces 50% Parking lot Paseo de la Victoria (Córdoba) 50 years 447 spaces 100% Parking lot Llano de Torroba (Rincón de la Victoria, Malaga) 35 years 723 spaces 100% Metro de Malaga 35 years 12 Km. of line 12,62% Vélez-Malaga tram 25 years 1 tram line and 3 bus lines 33% Madrid-Toledo motorway 36 years 60 Km. roadway, 20 Km. motorway 17% La Mancha motorway 19 years Renovation and conservation 23,5% of 107 Km. of the A-4 Hospital del Tajo (Aranjuez) 30 years Construction and management 40% Non-health services Transport station for Line 1 Mairena del Aljarafe 40 years 16 bus platforms, 100% Sevilla Metro 10 taxis stops, 1.500 spaces, one 4* hotel, offices and commercial spaces Rosa Amarilla. Biomedicine Institute of Sevilla 35 years 1,000 parking spaces, 67,5% residences, cafeteria, commercial spaces and daycare centre Solar FV plant La Rinconada (Sevilla) 25 years 500 KW solar FV plant 100%
Madrid-Toledo Motorway
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Investments
The project portfolio currently under management by the division supposes an investment of some 300 million Euros over the net four years, 51% of which was invested by the end of 2007.
New Projects
During the year 2007 the division was awarded the project for the maintenance and operation of the A-4 motorway, section Puerto Lápice–Venta de Cárdenas. This is included within the tenders presented by the Ministry of Public Works as part of the First Generation Motorway Conditioning Plan.
The concession contract encompasses construction projects determined as initial construction, reforms, simple and large scale repairs, conservation and maintenance as well as the operation of the infrastruc- ture. The total investment committed to this project is 131,933,064 Euros with a concession period of 19 years.
Objectives
• Optimise invested resources to improve client satisfaction. • Consolidate the business areas currently under management and increase activities in various types of businesses in order to diversify further Sando’s operations. • Expand the geographical location where the division is present. • During the course of 2008, the Llano de Torroba parking lot (Rincón de la Victoria, Malaga) will come into operation.
The estimations for 2008 with the projects currently under management is to double total turnover and exceed 10.8 million Euros, achieving significant growth in order to reach the figure of thirty mi- llion Euros in the next five years.
In 2008, the division expects to improve its EBITDA/SALES ratio, surpassing 50% and maintaining the- se figures in the following years, reaching in the year 2012 results over 18 million Euros EBITDA.
The final estimated net result a negative 3,164,430 Euros. It is estimated that the equilibrium will be reached with the current portfolio in 2014.
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Metro station Malaga. (Preliminary info-graph)
113
CORPORATE division
Introduction Organigram Human resources Risk prevention and safety Organisation and systems General Secretariat Central Administration Finance Management Control Communication and Image Research, development and innovation management report 07sando
Barcelona Offices
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The Corporate Division provides services to support the operations of Sando’s other business areas, offering shared services which enhance company efficiency.
A part of the division’s competencies are to provide support to the company management while others constitute services whose costs are shared among the various areas of the group. The Directi- ves issued by the Corporate division support and manage company procedures in accordance with the strategic lines established by management. The key principles are co-ordination, communication and teamwork.
Organigram
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Human resources
Vision
Sando understands that its human resources are a strategic asset; the key differentiating element. For this reason, the company strives to incorporate the best professionals, properly trained and motiva- ted to perform effectively in their areas of competence within a positive workplace environment in pursuit of common goals.
The company provides the tools necessary to guarantee the professional development of its emplo- yees, with an integrated and effective management team dedicated to improvement.
Organisational structure
The Corporate Human Resources department is currently undergoing a restructuring which will per- mit it to pass from mere administration to a new business structure based on five key issues:
• Labour Relations • Training • Personnel Administration • Selection-Remuneration
In order for this structure to function effectively, oriented towards common business goals, it is fun- damental that there be direct connection between human resources management and the various business areas of the group.
Staff Evolution
The goal of Sando is to become a leading company in the creation of employment both nationally and internationally. An objective which can be achieved only by incorporating talent and consolida- ting the company as a dynamic and energised organisation.
The growth in Sando’s turnover during the course of 2007 was also accompanied by a significant increase in the number of professionals incorporated into the company, exceeding some 2,200 em- ployees.
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Staff Evolution
Employment rate
Annual rate of growth
119 management report 07sando
Additionally, the company has continued to promote quality employment, substantially increasing the number of employees with fixed contracts as indicated in the chart above.
Sando’s personnel are predominately between the ages of 25 and 39. This provides an indication of the potential this represents for he future of the company.
Staff age
Selection and Remuneration
One of the pillars of the human resources management model is called Employment and Benefits. Among the objective is the shifting of personnel to a system of professional recognition based on performance evaluation and merit.
The creation of a common culture requires an inventory of corporate talent. Personal interviews, fee- dback and individual development plans, are the tools used for the identification and evaluation of Sando’s group of professionals.
During 2007 a map of work positions was created with approximately 400 references. Company em- ployees were incorporated into a modern professional structure composed of groups and levels.
The year 2007 saw the continuation of the agreements with universities and professional training schools throughout Spain in order to capture the interest of graduates and facilitate their incorpora- tion into the company.
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Training
In accordance with the corporate vision of Sando, a key objective is the training of personnel to further their professional careers, understood as a career to be pursued within the framework of the company, and the consolidation of a socially responsible team of employees.
Investment in Training
Evolution of training hours
Projects
The future challenges in human resources management will no doubt be the issue of balancing professional and personal responsibilities, the embrace of diversity, the incorporation of the handica- pped and the selection and recruitment of talent at source. Other issues include the need for internal promotion of employees to management positions and especially to contribute to the development of Corporate Social Responsibility through human resources policies.
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Human resources will pursue the following projects:
• New organisation. Reengineering of processes. • Development and implementation of the Human resources ERP. • Expansion of training programs meeting the specific needs of personnel and in line with the stra- tegy and objectives of each area. • Development of innovative policies for variable remuneration and benefits for employees. • Implementation of systems and management policies for international personnel.
Sando Offices in Warsaw
Risk prevention and safety
Vision
The prevention of workplace risk is a fundamental goal of Sando, incorporated into its policy of Social Responsibility. Every year the company redoubles its efforts to achieve ever higher levels of workplace health and safety in all its installations, implementing the general objectives in risk prevention:
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• Integrated safety for all processes, areas and levels. • Specific Risk prevention training and information. • Continuous improvement of material conditions and risk prevention management systems. • Incident investigations. • Integration of partners and suppliers in the development and application of systems.
The Joint Risk Prevention Service is especially active in the following areas of risk prevention:
• Creation of preventive plans and programs. • Identification and evaluation of risk. • Adoption of appropriate risk prevention measures and oversight. • Staff training and information. • Monitoring of staff health and safety.
Activities
The principal activities of the Joint Risk Prevention Service are:
• Health and Safety Projects. Over one hundred projects were created and revised. • Reports and Inspections. Over 1,300 reports were made in 2007. • Analysis reports on hygienic risks. • Training activities: Classroom, on-site and distance learning courses and monthly publications. • Activities de information continua. • Consulting of business areas. • Internal audits. • Incident management. • Inspections from the Ministry of Employment or the Labour Authorities. • Institutional events. • Other actions.
The accident rate at Sando continues to be approximately half the construction industry standard.
Some 98% of workplace accidents causing leave during the course of 2007 were categorised as minor accidents.
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Projects
The Joint Risk Prevention Service will continue to pursue and improve its activities and has set the following safety goals:
• Complete risk prevention training for all staff, including top managers. • Adapt the Risk Prevention Management System (SGPRL) to the OHSAS 18001 specifications volun- tarily, which certifies the maximum standards of quality in Workplace Health and Safety and takes the lead in future certifications. • Implementation of the ERP Workplace Risk Prevention (integrated management system), bespoke software applications in order to share information with other systems within the corporation under a unique IT platform. • Define strategies for the oversight and management of risk and to raise awareness of Sando ma- nagement through periodic meetings at all levels establishing objectives and benchmarks. • Consolidation and training of risk prevention personnel implementing plans and internal and ex- ternal training programs.
Organisation and Systems
Vision
By assuming this competence, the division assumes the responsibility to provide the company with the management tools and IT systems necessary to optimise the creation of value and to assist in achieving its strategic objectives. This area also includes data protection, minimising risk and maximi- sing the retun of investments and business opportunities.
Information and the support systems, processes and networks are important assets within Sando. The availability, integration and confidentiality of information are essential to maintain competitive- ness, treasury, profitability and compliance with legal standards as well as the corporate image of the group.
Taking advantage of Information Technologies eliminates the inconveniences of geographical dis- persion, the mass of information requires for company activities and make data available where and when its needed.
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Organisational model
During the course of its revision and continuous improvement processes, this function has led to a modification of the company organisation in order to achieve a clearer focus on the needs of the company and improve quality and the availability of the services provided.
The new organisation is configured with the following structure and functions:
• Demand and Projects • Development • IT services • IT planning and management • Security • Quality
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Quality
Vision
Quality is a key factor in Sando’s management and represents a strategic asset in the capture and consolidation of new clients and markets. Quality management is based on the principles defined in ISO-9000:2000 international norm and orients the Quality Systems of the company towards complian- ce with ISO-9001:2000.
The basic objective consists is to achieve the optimum perception of the company on the part of clients of the performance of the various companies of the group.
The goal is to co-ordinate the various Quality, Environment and Production Control Systems and per- fect the overall management of the same.
The principal functions are:
• Design and implementation of Quality systems.
• Updating of these systems according to the development of applicable interational norms.
• Creation of the necessary documentation.
Sando building Alameda
126 corporate division
• Supervision and auditing of implemented systems.
• Annual reviews.
• Training of personnel in Quality and Environmental management.
• Co-ordinate the various external audits and conduct of company representatives during the same.
• Support the definition of techniques for purchasing specifications for projects.
• Creation of organisational procedures and the revision of specific procedures in each area.
Projects
The Quality and Environment department will undertake the following projects:
• Implement and certify a Production Control System with the CE certification for bituminous mix- tures.
• Development, implementation and certification of Quality and Environment Management Sys- tems in Poland.
• Expand the extent of the Quality Systems in the area of construction incorporating the Design Control systems (point 7.3 of ISO-9001 norm).
• Definition and implementation of Quality and/or Environment Management Systems.
• Continuous Quality and Environment management training in the construction area.
• Finalise the map of procedures pending development.
• Complete the definition of documentary needs for administration.
General Secretariat
The recently created General Management Secretariat has unified the development and manage- ment of various departments: Legal, General Services, Insurance, Documentation and Archives.
The General Secretariat offers the technical means necessary to carry out the different activities under conditions of maximum physical and legal security in all offices of the company.
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Legal Services. Vision. Resources. Activities
This department will carry out and provide services necessary to facilitate the correct functioning of Sando companies. The goals is to guarantee the legal security of Sando personnel and resources.
The department has continued providing services wit a double focus: Legal and non-legal services and general consulting as well as the supervision of contracts and all types of documentation.
The territorial diversification of the company has led to an increase in the administration of interna- tional affairs related to its activities in the areas such as Mexico, Hungary, Romania and especially in Poland. The department reviews and participates in operations there, preparing documentation for public tenders or creating companies in the corresponding countries.
Given the special problems posed by operations in diverse areas in terms of legal procedures, it is necessary to count on a firm of external partners, properly supervised and co-ordinated.
Distribution of tasks by areas
General services. Vision. Activities
This department was created with the initial objective of managing the purchase and maintenance of Sando goods and services which are not related to specific production activities.
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Sando building in Warsaw
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The activity of the department is organised into several different areas:
• Maintenance. • Corporate purchasing. • Other general services.
Insurance. Vision. Activities
The objective of this department is to identify the risks involved in activities performed by Sando in order to contract insurance coverage for the same in an efficient manner.
During the last year, and after a public selection process among leading international firms, the MAR- SH company was selected as a partner. In co-ordination with the department, this consultancy firm provides analyses and pre-selection of insurers.
Documentation and Archive. Vision. Activities
This department was created at the end of 2006 in order to manage and supervise the growing volu- me of correspondence and documentation within Sano archives.
For a company like Sando it is imperative to properly manage administer and co-ordinate the recep- tion, circulation and management of received documentation as well as the custody and filing of corporate documents.
Central administration
Vision
The instrumentation of a series of procedures which permit reliable financial-economic information to be gathered, appropriately structured according to the needs of company management for accu- rate and timely information, meeting applicable business and fiscal norms.
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Administrative activities
The principal activities of the department are divided into three main areas:
• Management of Administration activities. • Management of the Central Accounting office of Sando. • Management of the Fiscal department activities.
Finance
Vision
The financial department, in its vocation to provide services to the various areas of the business, endeavours to forecast needs in the short, medium and long term and to facilitate the growth and profitability of these divisions.
Sando was consolidated in 2007 as a large scale investor, with the Real Estate area performing the most significant investments, such as the acquisition in May of Agofer. This operation was the largest corporate transaction in Sando’s history and established to company in Eastern Europe, especially in Poland and Hungary.
Financing
The operations undertaken with financial institutions has meant an increase in the company’s debt load, supported by Sando’s proven track record and its successful operations in the past. These finan- cial operations are also secure due to the professionalism of company management and in general, by all the persons who have put their faith in Sando’s future.
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Management Control
Vision
A diversified corporate entity such as Sando must evolve its financial management systems to include oversight of compliance of qualitative and quantitative business objectives.
This function is gaining increasing importance given the degree of diversification at both the business level or revenue streams and geogra- phical dispersion and the organisational com- plexity that this entails.
The company has adopted a model which co- ordinates functions between the department of corporate management and each business divi- sion.
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Activities
To define models of information and analysis:
• Define the information system of Sando Management, the budgeting system and the accounting and cost allocation model • Prepare monthly and indicator reports. • Analyse the deviations detected in the monthly reports and the trend indicators. To propose co- rrective measures. • Supervise compliance with company objectives and benchmarks in the achievement of results in the various areas of the group. • Prepare the information and analyses required by the Corporate division. • Co-ordinate long term strategic planning process.
Projects
Once the implementation of the projects planned by the departments for the year 2007 has been finalised, these must be consolidated and stabilised within the framework of the following systems:
• Corporate Information System (CIS) • Budgeting System.
Communication and Image
Vision
The department is responsible for the creation and execution of Sando’s internal and external com- munications, with special emphasis on the design and contracting of company marketing and adver- tising and relations with the media.
At the same time, this department co-ordinates and orients the image of the various companies of the Sando group in order to establish common corporate identity and define their activities effectively.
The department is divided into two areas:
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• Internal and external communications • Advertising and Image
In the execution of its functions, this department uses external communications consulting services in Spain and Poland.
Sando Offices in Madrid
Internal and external communications
Sando’s communications are managed under the Internal and External Communications Plan which establishes a planned system of actions, determines the definition of workplace relations, the optimi- sation of the workplace environment and assuming the objectives, values, image and general policy of the company. There are various specific actions contained within this Plan.
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Principal activities executed in this area:
• Co-ordination of the Communications Plan. • Creation of content for external and internal publications. • Publishing of a monthly magazine “Conversando” distributed to all employees of the company. • Organisation of events. • Management of relations with the media. • Co-ordination of company websites, especially the Corporate website. • Oversight of the media.
Advertising and Image
Image and advertising are the principal vehicle for expression of a company both internally and ex- ternally. The Communications department designs and manages all messages and marketing cam- paigns. The goal of this department is to create a single coherent brand image expressing the values of Sando.
A series of different activities are carried out in this line:
• Design of advertising campaigns (external and internal). • Creation of media plans by area. • Marketing campaigns. • Advertising agreements with the media. • Sponsorship management. • Co-ordination, implementation and renovation of the company image. • Design and layout of magazines, manuals, brochures, etc.
Special attention should be given to the advertising and marketing services performed for the Real Estate and Construction divisions, as well as for the Sando Foundation.
Activities
The following is a list of the most significant activities in which the company participated or organised during 2007:
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• Salón Inmobiliario of Madrid • Salón Inmobiliario del Mediterráneo in Malaga • Barcelona Meeting Point • Caminos de Hierro Exhibition • AETOS Congress • ANCI Congress • V Congress of Civil Engineering • Expovial Congress • Employment Fair (Polond) • Grupo Joly Forums • Surban • Open Door Event at the University of Malaga • First Sando Gold Tournament • Managers Convention • Benefit concerts for the Sando Foundation • Workplace Risk Prevention conference for the Sando Foundation
Research development and innovation
Vision
In conjunction with its Corporate Social Responsibility policy, Sando is a leader in R&D+I initiatives in- corporated into its production and organisational processes. The expansion enjoyed by Sando in the last decade has been the product of a process of sustainable growth and a business strategy where research development and innovation play an essential role.
Activities
In early 2007, Sando made a qualitative lead with the acquisition of 24.5% of the company AT4 Wire- less. This is an international firm in the Information and Communications Technology sector dedica- ted to providing its clients with technological solutions which ensure their products and services are secure, efficient and meet engineering and technical standards for applications and systems.
Sando is a pioneer in the application of new technologies to its business activities, promoting R&D+I initiatives:
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• The company is a co-founder, sponsor and registered partner of the Fundación Corporación Tec- nológica de Andalucía. In 2007 two projects presented by Sando were approved and whose viabi- lity phase exceeds 300,000 Euros: - Technical viability study of thermal solarelectric plant, Fresnel type. - Reenueb@, Renewable and efficient energy for urban environments and buildings applications.
• Promotes and leads the Construction Research Centre (Hábitat) in Malaga, in conjunction with the Parque Tecnológico de Andalucía.
• Sando, as a member of the Asociación Nacional de Constructores Independientes ANCI, has rea- ched a framework agreement with the Centro de Estudios y Experimentación de Obras Públicas (CEDEX) for the promotion of applied research (R&D+i) and technology transfer encouraging the use and application of new technological advances in the construction sector.
• The company has an area dedicated to projects and installations making use of renewable ener- gies. The company currently operates a fully functioning 500 KW solar FV plant in La Rinconada, Sevilla, which is earmarked for expansion. • The Materials and Supplies division is developing in La Rinconada, Sevilla, a model and environ- mentally sustainable operation, extracting materials for construction and regenerating the area with inert treated waste. When finished, this process will restore the land to optimum condition for agricultural use.
During 2008, Sando will begin construction of a building housing and supporting its global R&D+I activities in the Cartuja 93 industrial park in Sevilla. This centre will allow Sando to pursue research into new technologies and further its social commitment.
Oficinas Sando en Madrid
138 corporate division
139 annex ANNUAL ACCOUNTS
Financial Statement Balance Financial report Management Report Report Grupo Empresarial Sando S.L. and Subsidiary Companies
Consolidated Annual Accounts for the year Ending December 31, 2007 and Management Report with the Independent Auditor’s Report Deloitte.
AUDITOR’S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
Translation of a report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.
To the Partners of Grupo Impresarial Sando S.L.
We have audited the consolidated financial statements of Grupo Impresarial Sando S.L and Subsidiaries (Note 1) com- prising the consolidated balance sheet at 31 December 2007 and the related income statement, and the consolidated financial statement for the year then ended. The preparation of these consolidated financial statements is the res- ponsibility of Grupo Impresarial Sando S. L. Our responsibility is to express an opinion on the consolidated financial statements taken as a whole based on our audit work performed in accordance with generally accepted auditing stan- dards, which require examination, by means of selective tests, of the evidence supporting the consolidated financial statements and the evaluation of their presentation of the accounting policies applied and of the estimates made.
As required by Spanish corporate and commercial law, for comparison purposes the Parent’s directors present, in addition to the figures for 2007 for each item in the consolidated balance sheet, consolidated income statement, consolidated cash flow statement and consolidated statement of changes in equity, the figures for 2006. Our opinion refers only to the consolidated financial statements for 2007. On 22 May 2007, we issued our auditor’s report on the 2006 consolidated financial statements, in which we expressed a favourable opinion.
In our opinion, the accompanying consolidated financial statements for 2007 resent fairly, in all material respects, the equity and financial position of Grupo Impresarial Sando S.L. at 31 December 2007 and the results of their operations and the resources obtained and applied for the year ended and contain the required information, sufficient for their proper interpretation and comprehension, in conformity with generally accepted auditing standards. On a basis con- sistent with that of the preceding year.
The accompanying consolidated director’s report for 2007 contains the explanations which the Parent’s directors con- sider appropriate about the Group’s situation, the evolution of its business and other matters, but it is not an integral part of the consolidated financial statements. We have checked that the accounting information in the consolidated director’s report is consistent with that contained in the consolidated financial statements for 2007. Our work as audi- tors was confined to checking the consolidated director’s report with the aforementioned scope, and did not include a review of any information other than that drawn from the Group’s accounting records.
Deloitte, S.L. Registered in ROAC under no. S0692 signed Rafael Orti Baquerizo June 23, 2008 GRUPO EMPRESARIAL SANDO S.L. Y SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2007 AND 2006 (NOTES 1,2,3 &4) (thousands of Euros)
ASSETS 2007 2006 LIABILITIES 2007 2006
SHAREHOLDERS BY NON-REQUIRED PAYMENT - 2.179 EQUITY (note 12) Share capital 36.665 36.665 FIXED ASSETS Establishment costs (see note 4) 1.315 1.466 Other reserves of parent company Intangible fixed assets (see note 6) Distributed reserves 230 230 Intangible goods and rights 96.222 87.251 Non-distributed reserves 26 26 Provisions and amortisation (19.644) (19.422) 76.578 67.829 256 256
Fixed Material Assets (Note 7) Reserves in consolidated companies 241.718 114.958 Property and constructions 161.957 64.198 Technical installations and machinery 58.384 44.023 Other fixed assets 25.130 20.552 Reservas en sociedades puestas en equivalencia 396 271 Current advances and material assets 52.012 23.419 Provisions and amortisation (59.287) (45.843) Conversion differences (note 4-d) 238.196 106.349 of consolidated companies 2.046 (2.084) Inmovilizaciones financieras (Nota 8) 2.046 (2.084) Participaciones puestas en equivalencia 14.606 5.414 Profits and losses attributed to Parent company Cartera de valores a largo plazo 48.115 32.588 Consolidated profit and loss 52.179 126.870 Otros créditos 16.208 32.099 Profits and losses attributed to external companies 186 15 Provisiones (5.337) (176) 52.365 126.885 73.592 69.925
TOTAL EQUITY 333.446 276.951
EXTERNAL PARTNERS (note 13) 16.260 14.542 TOTAL FIXED ASSETS 389.681 245.569
COMMERCIAL CONSOLIDATION FUND (note 5) Companies consolidated by global or proportional integration 38 - Companies integrated by equivalence 6.322 - 6.360 -
COSTS OVER VARIOUS YEARS 6.225 3.444 INCOME OVER VARIOUS YEARS 2.441 409
CIRCULATING ASSETS RISK AND COST PROVISIONS (note 14) 3.592 3.355 Inventory (note 9) 1.407.060 833.010 LONG TERM CREDITORS Debtors Debts with lending entities (note15) 908.715 361.153 Clients of sales and services 620.923 424.643 Other creditors (note 16) 78.490 53.683 Companies in equivalence 2.141 235 987.205 414.736 Other debtors 114.089 84.144 Provisions (5.130) (4.527) 732.023 504.495 Temporary financial investments SHORT TERM CREDITORS Short term asset portfolio 303 5.816 Debts with lending entities (note 15) 628.066 368.687 Loans with companies in equivalence - 1.202 Debts with companies in equivalence (note 11) 54 445 Other loans 67.026 63.067 Commercial creditors (note 16) 556.164 465.509 67.329 70.085 Other non commercial creditors 127.702 123.908 Treasury 87.015 40.251 Provisions for traffic operations (note 19) 43.314 34.298 Adjustments for periods 2.551 4.094 Adjustments for periods - 287 TOTAL CIRCULATING ASSETS 2.295.978 1.451.935 TOTAL SHORT TERM CREDITORS 1.355.300 993.134 TOTAL ASSETS 2.698.244 1.703.127 TOTAL LIABILITIES 2.698.244 1.703.127
Notes 1 to 24 of the report are an integral part of the consolidated balance sheet for the year ended December 31, 2007. GRUPO EMPRESARIAL SANDO S.L. Y SUBSIDIARY COMPANIES CONSOLIDATED PROFIT AND LOSS ACCOUNT AT DECEMBER 31, 2007 AND 2006 (NOTES 1,2,3 & 4)
2007 2006 2007 2006 Expenditures: Income: Reduction in inventory of finished products Net Turnover (Note 19) 900.898 658.532 and in production - - Increase in Inventory of finished products and in production 85.878 93.140 Consumables and other external costs (Note 19) 694.109 386.063 Transfer of inventory to assets 1.918 - Transfer of assets to inventory - 143.918
Personnel costs Trabajos efectuados por el grupo para el inmovilizado 25.393 14.804 Salaries, wages and related items 75.975 52.522 Social costs (note 19) 19.333 14.100 Other operating revenues 34.421 27.073 95.308 66.622
Provisions for asset amortisation 19.801 15.563
Variaciones de las provisiones de tráfico (Nota 19) 2.238 29.723
Other operating costs 129.095 96.580
OPERATING REVENUES 107.957 55.080 OPERATING LOSSES - -
Financial costs 63.174 16.364 Income from capital 1.935 5.181 Losses in temporary financial investment - 150 Other financial income 10.439 2.158 Variation of provisions for Financial investments 5.161 - Profits from temporary financial 2.094 1.630 Negative exchange differences 2.126 - investments 2.667 0 70.461 16.514 17.135 8.969 POSITIVE FINANCIAL RESULTS - - NEGATIVE FINANCIAL RESULTS 53.326 7.545
Participation in losses of companies in equivalence - - Participation in profits of companies in equivalence 597 163 Amortización del fondo de comercio de consolidación 235 - 597 163 PROFITS ON ORDINARY ACTIVITIES 54.993 47.698 LOSSES ON ORDINARY ACTIVITIES - -
Losses on assets 394 80 Profits from fixed assets 4.172 26.106 Variation in provisions for material and intangible fixed assets 224 8 Profits from sale of shares in Extraordinary costs and losses 1.473 518 globally integrated companies - 98.189 2.091 506 Capital transferred to results 82 103 Extraordinary income/profits 1.477 351 5.731 123.749 POSITIVE EXTRAORDINARY RESULTS 3.640 123.143 NEGATIVE EXTRAORDINARY RESULTS - - PRE-TAX CONSOLIDATED PROFITS 58.633 170.841 CONSOLIDATED PRE-TAX LOSSES - - Tax on revenues (note 17) 6.454 43.968 ANNUAL CONSOLIDATED REVENUES (Profits) 52.179 126.873 CONSOLIDATED ANNUAL RESULTS (losses) - - Revenues attributed to external partners (Profits) - - Results attributed to external partners (losses) 186 - ANNUAL REVENUES ATTRIBUTED TO PARENT COMPANY (PROFIT) 52.365 126.888 ANNUAL RESULTS ATTRIBUTED TO PARENT COMPANY (LOSSES) - -
Notes 1 to 24 of the report are an integral part of the consolidated balance sheet for the year ended December 31, 2007. Grupo Empresarial Sando S.L. And Subsidiary Companies
Report corresponding to the year ended December 31, 2007
1. Outline of the Structure and Companies of the Group
GRUPO EMPRESARIAL SANDO S.L., domiciled in Madrid at Avda Manoteras 46 – 6º B, was constituted on July 5, 2002 as the result of an agreement for partial division - registered on July 5 2002 – of Cons- trucciones Sanchez Dominguez- SANDO S.A. (Sole proprietorship company) by which said company transferred the divided patrimony in whole to the newly constituted company. The balance of the partial division of Construcciones Sanchez Dominguez – SANDO S.A. (Sole proprietorship company) was the following: Thousands of Euros Thousands of Euros
FIXED ASSETS SHARE CAPITAL 10.437 Intangible fixed assets 1 Material fixed assets 61 Financial fixed assets 10.375 PROFITS AND LOSSES - 10.437
TREASURY -
ASSETS 10.437 LIABILITIES 10.437
By virtue of Article 259 of the Renewed Text of the Incorporated Companies Act, the company is res- ponsible for the obligations transferred by the act of division. Furthermore, there were no creditors in disagreement with the partial division project, and therefore it was not necessary to provide additio- nal guarantees in favour of the same. Additionally, and by virtue of said partial division agreement, no accounting re-valuations occurred in the patrimony through the operation of partial division.
The principal objective of the Parent Company, among others, is the acquisition, ownership, adminis- tration and sale of real estate assets as well as providing services in the management and administra- tion of the Companies in which it participates either directly or indirectly.
All the partners of the Parent Company are physical personas.
During the fiscal year 2007, certain companies of the Group carried out a merger process for the ab- sorption of the company Agofer Construcciones S.L. “Agofer S.L.” “Avanza Grupo Inmobilaria S.L. and “Nueva Dimension Empresarial S.L.” acquired during the year 2007. The effect of this merger and the balances of the corresponding merger will be indicated in the following paragraphs. On August 3, 2007, the merger agreement for the absorption of “Agofer S.L.” “Avanza Grupo Inmobi- laria S.L. and “Nueva Dimension Empresarial S.L.” by “Construcciones Sanchez Dominguez-SANDO S.L. (Sole proprietorship company) and “Sando Proyectos Inmobilarias S.A. (sole proprietorship company)” was duly registered and resulted in the dissolution of the absorbed companies and the block transfer of assets to the absorbing companies through universal succession of the rights and obligations of the absorbed companies.
For accounting effects, the merger operations through the absorption of the mentioned companies are considered as performed on January 1 2007. Consequently, all operations performed by the ab- sorbed companies from January 1 2007 are considered as performed by the Group.
Both merger projects were approved by the respective Sole Owners on June 26, 2007. The merger considered the transfer to the absorbing companies of the following assets and liabilities until then property of the absorbed companies:
ASSETS Thousands of Euros LIABILITIES Thousands of Euros
FIXED ASSETS: EQUITY Establishment costs 10 Share Capital 4.723 Fixed intangible assets 853 Reserves 46.222 Fixed material assets 23.261 Negative results of previous years (35) Financial fixed assets 29.629 Profits and Losses (profits) 33.260 Long term debtors 2.525 Total fixed assets 56.278 Total Equity 84.170
COSTS DISTRIBUTED OVER VARIOUS YEARS 3.198 LONG TERM CREDITORS 155.810
CIRCULATING ASSETS SHORT TERM CREDITORS
Inventory 247.811 Debts with lending entities 106.207 Debtors 142.163 Debts with Group companies 21.119 Temporary financial investments 11.590 Commercial creditors 74.946 Treasury 7.701 Other non commercial creditors 19.240 Adjustment for periods 151 Provisions for traffic operations 7.400
Total Circulating Assets 409.416 Total circulating liabilities 228.912 TOTAL ASSETS 468.892 TOTAL LIABILITIES 468.892
The companies which make up the GRUPO EMPRESARIAL SANDO S.L. and Subsidiary companies, included in the consolidation by the method of global integration, and the information related to the same at December 31, 2007 are the following: DIRECTLY HELD COMPANIES OF THE GROUP
Name and Domicile Direct company Share Reserves Annual Share value Activity participation capital results
(*) the remaining percentage corresponds to indirect participation through the company Sando Di- versificacions S.L. (Sole proprietorship company).
Note: the figures in this tale and the following tables have been provided by the companies of the GROUP and their patrimonial situation in their individual annual accounts for the year 2007. The com- panies whose annual accounts have been audited show the symbol (x). INDIRECTLY HELD COMPANIES OF THE GROUP
Name and Domicile Indirect company Share Reserves Annual Activity participation capital results
(a) the rest of the share in these companies is held by Construcciones Sanchez Dominguez - SANDO S.A. INDIRECTLY HELD COMPANIES OF THE GROUP
Name and Domicile Indirect company Share Reserves Annual Activity participation capital results
(*) the rest of the share capital is held by the Grupo Empresarial Sando directly. (**) 99% of remaining shares are held by the company of the Group Sando Desarollos Inmobilarios S.L. (Sole Proprietorship company) (a)the annual accounts for these companies are expressed in Polish Zlotys. For the purposes of this report, the figures indicated have been converted into Euros, applying the exchange rate for the Profit and Loss account (1€=3.5935 Zlotys) and the historic exchange rate for company funds. (b) the annual accounts for these companies are expressed in Hungarian Florins. For the purposes of this report, the figures indicated have been converted into Euros, applying the exchange rate for the Profit and Loss account (1€=253.73HF) and the historic exchange rate for company funds. (c) the annual accounts for these companies are expressed in Romanian Leu. For the purposes of this report, the figures indicated have been converted into Euros, apply the exchange rate for the Profit and Loss account (1€=3,6077Rl) and the historic exchange rate for company funds. INDIRECTLY HELD COMPANIES OF THE GROUP
Name and Domicile Indirect company Share Reserves Annual Activity participation capital results INDIRECTLY HELD COMPANIES OF THE GROUP
Name and Domicile Indirect company Share Reserves Annual Activity participation capital results (*)the annual accounts for these companies are expressed in Polish Zlotys. For the purposes of this report, the figures indicated have been converted into Euros, applying the exchange rate for the Profit and Loss account (1€=3.5935 Zlotys) and the historic exchange rate for company funds. (**) the annual accounts for these companies are expressed in Pounds Sterling. For the purposes of this report, the figures indicated have been converted into Euros, applying the exchange rate for the Profit and Loss account (1€=0.692UK P) and the historic exchange rate for company funds.
Note: the totality of the companies in the above tables are integrated into the consolidated group through share holdings of over 50% and the majority of voting rights.
The associated companies included in the consolidation by the method of equivalence and the rela- ted information are the following: ASSOCIATED COMPANIES THROUGH INDIRECT PARTICIPATION
Name and Domicile Direct company Share capital Reserves Annual activity participation results
SandoMemo07.indd 154 23/07/2008 11:33:25 2. Distribution of the Results of the Parent Company
During the year 2007, the Parent company of the Group obtained earnings of 60.006 thousand Euros. The distribution proposal of the results of the fiscal year 2007 to be presented by the Administrators for their approval before the General Partners Meeting will be the following:
Thousands of Euros
Base: Profit and loss (profit) 60.006 Application: Legal reserve 6.000 Other reserves 54.006 60.006
3. Basis for the Presentation of the Consolidated Annual Accounts a) Basis of presentation
The attached consolidated annual accounts have been prepared from the accounting records of the Grupo Empresarial Sando S.L. and the companies included in the consolidation (detailed in Note 1) and whose respective annual accounts have been prepared by the Administrators of the each com- pany in accordance with the applicable legislation in order to provide a fair view of the patrimony, financial situation and the results of the Group.
The attached consolidated accounts, which have been prepared by the Administrators of the Group Empresarial Sando S.L. and the annual accounts of the Grupo Empresarial SANDO S.L. and their con- solidated subsidiaries are subject to the approval of the corresponding Ordinary General Partners’ Meeting, considering that these will be approved without modifications. b) Principles of consolidation
The definition of the Group “Grupo Empresarial Sando and Subsidiary Companies” has been perfor- med in accordance with the Royal Decree 1815/1991 approving the norms for the creation of Conso- lidated Annual Accounts and the generally accepted accounting procedures described in Note 4 of this Report, includes all the companies detailed in Note 1. There is no obligatory accounting principle that has a significant effect in the annual accounts which has not been applied.
The consolidation has been performed applying the global integration method for those companies over which there is effective control by possessing the majority of the votes in the representative organs or where the parent company has a notable influence in their management and the case of equivalence case in which there is a significant influence but without the majority of voting rights.
The value of the shares of the minority shareholders or partners in the patrimony and in the results of the subsidiary companies is represented in the section “ external partners” of the liabilities of the consolidated balance sheet and in “results attributed to external partners” of the consolidated profit and loss account respectively. In the preparation of the consolidated annual accounts we have proceeded with the elimination of all the balances and transactions between consolidated companies, providing the sums are relevant, as well as the results produced between said companies as a consequence of previous transactions.
In accordance with the approved norms for the preparation of the consolidated annual accounts, these do not include the corresponding fiscal effect of the incorporation in the accounts of the Parent company of the reserves generated by the consolidated companies as it is considered that transfers of reserves will not be made which are not subject to taxation at source. The sums reserved will be used as a source of financing in each consolidated subsidiary company. c) Comparison of information
In accordance with commercial law, the Administrators of the Parent company present for compara- tive effect with each of the items of the balance sheet, the profit and loss account and the financial structure, in addition to the figures for 2007, those corresponding to the year 2006. The companies acquired or constituted during the year 2007 by the GRUPO EMPRESARIAL SANDO S.L and which have been incorporated into the consolidation are the following:
Company Domicile Method of consolidation
Global integration Global integration
Global integration
Global integration
Global integration
Global integration Global integration Global integration
Global integration
Global integration Global integration Global integration Global integration
Global integration
Global integration
Global integration
Global integration Equivalence Equivalence Equivalence Equivalence Equivalence
(*) these companies constitute a subgroup lead by Sando Inmobilaria Polska S.P. (**) company incorporated into the consolidation through the escision of the area dedicated to the creation, commercialisation, and execution of project using asphalt materials of the Group company CONSTRUCCIO- NES ASFALTOS Y CONTROL S.A.
SandoMemo07.indd 157 23/07/2008 11:33:26 The companies detailed above, incorporated within the consolidation during the year 2007, are newly constituted or of recent creation, and so their incorporation into the consolidated Group has not sig- nificant effect on the consolidated reserves of the Group of the consolidated results. d) Adaptation to the New General Accounting Plan
On November 20, 2007, the R.D. 1514/2997 was published approving the new General Accounting Plan taking effect on January 1, 2008, the application of which is mandatory for all fiscal years initiated from that date.
Said Royal Decree establishes that the first annual accounts to be prepared using the criteria contai- ned in the same will be considered initial annual accounts, although presenting information from the previous year is permitted for comparative purposes, providing it is adapted to the new plan. Additio- nally, the Plan contains various transitory conditions which permit different options in its application for the first time as a new accounting norm as well as the voluntary adoption of certain exceptions within the initial application process.
The Parent company and the subsidiary companies are carrying out the transition plan for adaptation to the new accounting norm which includes, among other aspects, the analysis of differences in ac- counting criteria and norms, the determination if adapted comparative information will be presented in the transition and therefore, from the date of the balance, the selection of the accounting criteria and norms to apply during the transition and the evaluation of the modification necessary in the procedures and information systems.
As of the date of preparation of the present annual accounts, the aforementioned plan is in the exe- cution stage and it is currently impossible to estimate in an integral and reliable way with all relevant information the possible impact of the transition.
4. Accounting Principles and Valuation Norms
The valuation norms used in the preparation of the present consolidated annual accounts have been the following: a) Differences of first consolidation
The differences of the first consolidation area calculated from the difference between the sum of the acquisitions (direct or indirect) of shares or participation in the consolidated subsidiary companies and the theoretical accounting value of the same on the date of their acquisition.
The majority of the positive differences from the first consolidation are found assigned as the greater value to the different assets property of the Group of Companies with the exception of a commercial fund of 6,350 thousand Euros generated during the year for the acquisition of certain companies of the Grupo Agofer as well the acquisition of Cetecom S.A. Said commercial fund is amortised lineally during a maximum period of twenty years providing this is the period during which it will contribute to the profits of the Group. The totality of the negative difference for the first consolidation arose as a consequence of the pro- cess of company reorganisation carried out by the new consolidated Group of Companies and by which the former group Construcciones Sanchez Dominguez SANDO S.A. and subsidiary companies disappeared resulting in the totality of these negative differences to be considered as reserves in consolidated companies by virtue of article 22.3 and 25.4 for the R.D. 1815/1991 regarding the norms for the preparation of consolidated annual accounts. This indicates that the negative differences in consolidation generated by the incorporation of companies to the Group at the beginning of the year in which they are obliged to present consolidated annual accounts can be considered as reserves.
b) Transactions between companies within the consolidated group
The totality of the balances and operations between the companies of the group have been elimi- nated in the process of consolidation. Thus all margins for internal operations between companies of the Group have been eliminated.
c) Homogenisation of the entries
In order to present homogeneously the various entries which compose the consolidated annual ac- counts, the following basic homogenising criteria has been applied to the presentation of individual annual accounts of the companies of the group and subsidiaries:
• Temporal homogenisation • Evaluative homogenisation • Homogenisation of internal operations • Homogenisation in groupings and presentation
SandoMemo07.indd 159 23/07/2008 11:33:26 The movement in this section of the consolidated balance sheet at December 31 2007 is the follo- wing:
Thousands of Euros
Balance at December 31, 2006 1.466 Additions 73 Entry by merger 10 Amortisation (234) Balance at December 31, 2007 1.315
The application to the consolidated profit and loss account for the year 2007 in terms of amortisation of these costs is presented in the section: “Costs – provisions for fixed amortisation of assets” in said consolidated profit and loss account. f) Fixed intangible assets
Fixed intangible assets are primarily the rights over goods under financial leasing, the commercial merger fund, IT applications, administrative concessions and reversion rights of properties.
The administrative concessions included in this section of the company balance are valued at their acquisition cost and correspond, principally, to the exploitation rights of certain quarries operated by various companies of the group and the concession costs of other operations. In the case of admi- nistrative concessions affecting the fixed material assets, which include the costs of construction of certain buildings whose exploitation falls under a concession, the same are included as fixed tangible assets. These intangible assets are lineally amortised during the period between the date of acquisi- tion and the finalisation date of the concession varying between 35 and 75 years.
The commercial merger fund consists of the differences between the cost of acquisition, net added value assigned as an increase in value of the assets and the theoretical accounting value of various subsidiaries of the Grupo Agofer, acquired during the year and which have been absorbed by certain companies of the Group. Said commercial fund is amortised over 20 years, a period during which it is estimated they will contribute to the profits of the Group.
The rights derived from the financial leasing contracts in effect are accounted as intangible assets according to the account value of the good, reflected in the liabilities of the total debt by quotas plus the sum of the purchase option. The difference between both sums, which represents the financial costs of the operation, are accounted as costs to be distributed over various years and imputed to the consolidated results of each year in accordance with financial criteria.
The companies amortise their rights on acquired goods under financial leasing according to a lineal method, distributing the cost of the assets over the estimated useful life of the intangible assets for which rights are held. Reversion rights on lands are valued at their cost of acquisition. This asset corresponds to the rights over certain properties that were expropriated or ceded for public use by its proprietors in the past. Given the urban development plant of the Municipality of Sevilla, where the mentioned property is located, modified its use, the rights of reversion are being executed. At the moment of execution, the sums of the corresponding rights are transferred to the section “Inventory – land and parcels”
Additionally, the IT applications are valued at their cost of acquisition and are amortised according to the lineal method for a period of three to four years.
The charges made to the consolidated profit and loss account for 2997 as amortisation of intangible fixed assets rose to 8,887 thousand Euros and is presented in the section “Costs – Provisions for amor- tisation of fixed assets” of the corresponding profit and loss account for said year. g) Fixed material assets
Fixed material assets are valued at their price of acquisition, which does not exceed market value.
The costs of expansion, modernisation or improvement which represent the increase in productivity, capacity or efficiency or al lengthening of useful life of goods, its capitalised as a greater cost of the goods. The goods and retired elements, both in the case of a modernisation process or due to any other cause, is accounted by discounting the balances presented in the corresponding asset account and accumulated amortisation.
The costs of conservation and maintenance are charged to the consolidated profit and loss account of the year in which they are incurred.
The replacement parts which remain in the company for longer than one year are considered as fixed assets and are amortised over the useful life of the machinery in which they are installed.
The buildings under lease are valued at cost or acquisition or production or their execution value (deductions of commercialisation costs) if this is the less, in which case the corresponding valuation correction will be made.
The companies amortise their fixed assets and the rights over goods under financial leasing following a lineal method, distributing the cost of the assets over the estimated useful life of the assets accor- ding to the following table which is homogenised with the previous year:
Estimated Useful Life
Constructions 30 to 50 Technical installations and machinery 3 to 14 Other installations, tools and equipment 4 to 10 Other fixed assets 3 to 8 The sum charged to the consolidated profit and loss account for 2007 as the amortisation of fixed material assets totals 10,680 thousand Euros, entered under the section “COSTS – Provisions for amor- tisation of fixed assets” of the consolidated profit and loss account. h) Negotiable assets and similar financial investments
Excepting investment in associated companies, which are presented as in equivalence, as indicated in Note 3-b, the rest of the investments in real estate assets are accounted, both in the case of fixed or variable income assets and long or short term, in accordance with the criteria indicated below:
Assets with an official valuation: the lesser value between the cost of acquisition and the market value. As a market asset it is valued according to the average official listing for the final quarter of the year or the listing at the close of the year, whichever is lower.
Assets without official valuation: the cost of acquisition, lessened when applicable, by the necessary provisions for depreciation, excess cost of their reasonable value at the close of the year determined according to the theoretical-accounting value of the share at that time, corrected by the sum of tacit added value existing at the moment of acquisition and remaining at the moment of valuation.
The losses which, as the case may be, are manifested as a result of comparing the cost and market value or theoretical – accounting value at the end of the year are entered in the section “Provisions” of the “Fixed financial assets” of the consolidated company balance sheet. i) Costs distributed over various years
The sums for this section of the consolidated balance sheet at December 31, 2007 corresponds to the financial costs incurred due to the postponement of payments of debts and aperture costs of loans which are accounted to the profit and loss account of each year according to financial criteria.
Additionally, the Group, in accordance with the principle of correlation between income and expen- ditures, applies the criteria of activating in the section “Costs distributed over various years” the com- mercialisation and advertising costs incurred, transferring them to the profit and loss account at the moment of the sale of the promotions to which they correspond. j) Non commercial loans
Non commercial loans, both short and long term, are entered by the sum provided which coincides with the nominal value of the loan. The interests imputed to the consolidated profit and loss account of the year are accrued according to financial criteria. k) Inventory
The stockpiling of prime or auxiliary materials for consumption and replacement, as well as properties and parcels for promotion, are valued at their cost of acquisition. In this respect, the costs of improve- ment of the land, of demolition of constructions when necessary for new construction as well as the financial costs incurred during the improvement stage until the parcel is suitable for construction are all included as added value of the property.
The products and work in progress are valued as production costs, including the costs of the materials used, labour and direct production costs.
Current real estate promotions include the costs incurred until the close of the year for promotions whose construction was not yet finished by that date. These costs include basically, the parcel, de- velopment, project, licences, construction, financial costs and other specific costs corresponding to the period of execution. Current short cycle promotions are considered as those whose termination is estimated for the following year, all others are considered long cycle promotions. The book cost of said promotions does not exceed the estimated value according to the available valuation performed by independent experts.
The goods received through the collection of debts are entered for the value of the compensated debt in addition to all necessary costs incurred in the operation or for the value of the operation in the case this is less.
The initial costs of projects pending adjudication are entered according to the real costs incurred while the adjudication was as yet unknown. When a project is adjudicated, the costs are registered during the period of the project as the project advances. Contrarily, the costs are directly imputed to the results of the year.
The valuation of obsolete, defective or slow moving products is reduced to their possible liquidation value is this is estimated as inferior. l) Income distribute over various years
This section of the company balance sheet indicates received capital subsidies, income for deferred interest and uncollected positive exchange rate differences principally. m) Indemnities for dismissal
In accordance with applicable labour regulations, the Companies of the Group are obliged to pay an indemnity to employees who, under certain circumstances rescind their employment relations. Based on possible dismissals which may occur under normal circumstances in the future, the liabilities de- rived as indemnities at December 31, 2007 is not significant. Consequently the consolidated balance sheet does not include a provision for this item. n) Provisions for risks and costs
Under the section “ Provisions for Risks and Costs” of the consolidated balance sheet at December 31 2007, the following entries are included:
1. Provision for risk and responsibilities: corresponding to the estimated sum of debt, commitments and probable or certain responsibilities whose payment is not yet determined or is uncertain as to the date they will occur, depending on compliance with specific conditions which are generally external to the company. The provisions will be made according to the best estimates of annual income. 2. Retirement bonus: The Collective Agreements subscribed by the employees of some of the com- panies of the Group establish that employees with receive a bonus upon retirement at a certain age (from 60 to 65) depending on their place of work and seniority with which they retire. The retirement bonus varies between 2 and 7 months salary. At the close of the present year, the companies subject to this obligation performed a personali- sed analysis of the possible liabilities under this item. At December 31, 2007 the calculations performed to quantify the liabilities derived from this item were applied according to the hypothesis of the interest rates and salary growth, considering current market conditions. 3. Provision of taxes: this corresponds fundamentally to the liabilities pending payment with the tax authorities for certain inspections performed in 2002 and appealed by the Group. 4. Costs of quarry restoration and reversion funds: This consist of the estimated costs to be incurred at the termination of the exploitation of quarries of the Group and the administrative concessions, calculated over a period of the useful life of these intangible assets, and updated. o) Debts
Debts, both short and long term, are accounted by their nominal value which coincides with their repayment cost. The difference between said value and the sum received is accounted under assets in the consolidated company balance sheet together with the costs for deferred interests, imputing the results according to a financial method. p) Provisions for traffic operations
The Group, where it is active in construction and promotion, will perform certain provisions to cover the risk and costs inherent in the termination of projects. The principal concepts for provisions are the indemnities to project personnel for the termination of the same, estimations of the possible costs of conservation of the project during the warranty period and the costs pending for promotions which are substantially terminated. q) Corporate tax:
Since January 1, 2003, the GRUPO EMPRESARIAL SANDO S.L. AND SUBSIDIARY COMPANIES, liquidates its Corporate Taxes through a consolidated fiscal declaration. (See Note 17)
The costs for Corporate Taxes for the year are calculated for each company according to its economic results before taxes, increasing or decreasing, as applicable, due to the differences with the fiscal re- sults, understood as the taxable base of said tax and reduced by the payments and deduction in the quota excluding retention and account payments. r) Income and expenditures
The Group, with regard to its construction activities, follows the procedure to recognise in each year as a result of their projects and services the difference between production (value at sale price of the project or service executed during said period found in the principal contract signed with the proprietor of the modification or additions to the same approved by the buyer, or the projects or services executed when not yet approved but there exists a reasonable certainty of return) and the costs incurred during the year.
The project executed during the year and pending certification at the end of the same is estimated through the valuation of the project units executed at prices established by the contract, forming part of the total sales and registered as an entry in the “Clients by sales and providing services” of the assets on the balance sheet until the definitive certification is emitted and collected.
The costs incurred for the realisation of the project is imputed in the same measure as they occur. The costs incurred during the initial period of the project installations and the studies and projects are capitalised and imputed as costs according to the execution of the project.
In real estate activities the sales and costs of the same for those sale contracts signed with clients when the execution of the project is largely terminated, that is, when the costs incurred are superior to 80% of the total estimated costs without taking into account the cost of land on which the promo- tion is constructed in which case provisions are made for the future pending costs upon termination. Consequently, the costs directly related to the real estate promotions (value of the land, certification of the project, supplies, etc) are entered in the section “Inventory” until income is registered through a sale, at which moment these are imputed to the corresponding profit and loss account.
For the rest of the activities and with a general character, the income and expenses are imputed according to the criteria of results, that is, according to when the real transfer of goods and services which these represent, independent of the moment in which the payment or financial transaction derived from the same occurs. However, following the prudence principle, the consolidated compa- nies only account profits generated at the end of the year in that the estimated risks and losses, still possible are accounted for as son as they are known. s) Environment
The costs derived from actions for the conservation and recovery of the environment incurred during the construction of production centres of the different companies of the Group are accounts as an additional cost of the asset affected in the year in which these occur.
Given the continuous improvements made to production centres of the companies of the group, in which environmental guidelines and established controls have been followed, the Administrators of the various companies of the group have not waited to incur fines and costs derived from environ- mental contamination in the future, making a provision for some of the risks and costs in this aspect.
The costs which, as the case may be, occur derived from environmental protection and improvement are imputed to the results of the year in which they occur, regardless of the moment in which the payment of financial transaction derived from the same occurs. t) Temporary Unions of Companies (UTE)
The execution of certain projects through the grouping of one or various companies under a regime of Temporary Company Union (UTE).
To register the results of projects executed under temporary union of companies with other compa- nies following the same criteria applied to the Group in its own projects.
The Temporary Union of Companies in which the Subsidiaries of the Group participate (Constructio- nes Sanchexz DOIminguez – SANDO S.A. (Sole proprietorship company) Construcciones Asfaltos y Contro- CONACON S:A; and Althenia S.L. have integrated their consolidated annual accounts at Dec- ember 31, 2007 through a method of integration proportional to their respective financial situations in the corresponding companies.
The sums presented in the consolidated annual accounts represent the totality of the Temporary Company Unions in which the Companies (Construcciones Sanchez Dominguez – SANDO S.A. (Sole proprietorship company) Construcciones Asfaltos y Control- CONACON S.A. and Althenia S.L. have participated before elimination are the following: Thousands of Euros Thousands of Euros OPERATING FUND 383 ESTABLISHMENT COSTS 10 CARRY OVER (117) NEGATIVE RESULTS FOR PREVIOUS YEARS (85) FIXED ASSETS Intangible Fixed assets 4.753 PROFITS AND LOSSES (7.645) Material fixed assets 7.137 Financial fixed assets 56 11.946 RISK AND COST PROVISIONS 420 COSTS OVER VARIOUS YEARS 8 LONG TERM CREDITORS 3.243 OPERATING ASSETS Inventory 16.330 SHORT TERM CREDITORS Debtors 159.726 Debt with lending entities 8.834 Temporary financial investments 21.402 Commercial debts 192.758 Treasury 52.321 Other non commercial debts 57.194 Adjustments for periods 1.233 Traffic operations provisions 7.991 251.012 266.777 ASSETS 262.976 LIABILITIES 262.976
Thousands of Euros Income / (expenditures)
Operating income Consumption Personnel costs Provisions for amortisation of fixed assets Traffic provisions variation Other operating expenses Operating Results Financial income Financial costs Financial results Ordinary results Extraordinary income Extraordinary expenses Extraordinary results Annual results
SandoMemo07.indd 167 23/07/2008 11:33:27 5. Commercial Consolidation Fund
The movements in this section of the consolidated balance sheet at December 313, 2007 is the follo- wing:
Thousands of Euros Balance at Additions Amortisation Balance at 31.12.2006 31.12.2007
Consolidated companies by global or proportional integration: Sando Inmobilaria Polska Sp. Companies in equivalence: Cetecom S.A. Sando Olesana S.L. Intercentros Barbera S.L. Balance at December 31 2007
SandoMemo07.indd 168 23/07/2008 11:33:27 6. Intangible fixed assets
The movement occurring during the year 2007 in the different accounts of intangible fixed assts and their corresponding accumulated amortisation are the following:
Thousands of Euros Balance at Additions or Entries Transfers (*) Withdrawal Balance at 31.12.2006 Provisions Merger (note 1) 31.12.2007
Cost: R&D Administrative concessions Commercial fund
Goods under Financial Leasing IT applications Licences (user rights) Reversion rights Other intangible fixed assets
Intangible fixed assets advances
Amortisation: R&D Administrative concessions Commercial fund Goods under Financial Leasing
IT applications Licences (user rights) Reversion rights Other intangible fixed assets
Provisions Net Intangible Fixed Assets
(*) Transferred from the section “Fixed Material Assets” (See Note 7) (**)Generated by the merger of the companies “Agofer Construcciones S.L., “Agofer, S.L.”, “Avanza Gru- po Inmobilario S.L.” and “Nueva Dimension Empresarial S.L.” with “Sando Proyectos Inmobilarios S.L. (Sole Proprietorship Company)”, and “Construcciones Sanchez Dominguez, SANDOS.A. (Sole Proprie- torship Company)” (See Note 1)
Within the section “Administrative Concessions” of the table above, the sum of 4,514 thousand Euros (considering the fiscal effect) corresponds to the assignment of the positive differences in the conso- lidation proceeding from the acquisition of certain companies of the Group during previous years and which were assigned as an increase in value for administrative concessions.
SandoMemo07.indd 169 23/07/2008 11:33:27 The consolidated companies are using the regime of financial leasing in the following elements of ma- terial and intangible fixed assets:
Payments made Original cost Payments Purchase Description Duration Years with purchase Previous Present pending option of contract lapsed option years year (Note 15) value
IT Applications Technical installations and Machinery Furnishings Other fixed assets
The details of the elements of intangible fixed assets amortised at the end of the year are the follo- wing: Thousands of Euros Administrative Concessions IT applications Other intangible fixed assets Balance at December 31, 2007
SandoMemo07.indd 170 23/07/2008 11:33:27 7. Material fixed assets
The composition of the balance of this section of the consolidated balance sheet at December 31, 2007 and the movements occurring during the year in the corresponding accounts are presented below:
Thousands of Euros Balance at Additions or Entries from Transfers Withdrawals Conversion Balance at 31.12. 2006 provisions mergers differences 31.12 2007
Costs Land and construction Technical installations and Machinery Other fixed assets Advances and current fixed assets
Amortisation Constructions Technical installations and Machinery Other fixed assets
Net Fixed Assets
* including the added value assigned to material assets, generated during the merger process for the sum of 15,265 thousand Euros. This increase in value was determined according to the valuation performed by independent experts. ** the total sum 26,910 thousand Euros has been transferred from the section “Intangible Fixed Assets” and the rest, 1,918 thousand Euros from “Inventory” (See Notes 6 and 9).
Within the section “Property and Constructions” of the above table, the sum of 8,681 thousand Euros (considering the fiscal effect) corresponds to the assignment of the positive differences in the conso- lidation proceeding from the acquisition of certain companies of the Group during previous years and which were assigned as an increase in value for property and constructions under ownership.
The section “Property and Constructions” of the above table includes property dedicated to leasing activities for the sum of approximately 86,215 thousand Euros and an associated accumulated amor- tisation of 2,879 thousand Euros at December 31, 2007.
At the end of the year a commercial area of 3,017m2 was acquired as well as an industrial warehouse of 1,750m2 for the sum of 24,800,000 Euros, registered in the section “Property and Constructions”. Currently, these are being leased to the same Company which figures as the lease holder of the pre- vious owner.
The section “Advances and current fixed assets” includes housing under construction which will be dedicated to rental by the Company and which is in progress as of December 31, 2007, for the sum of approximately 25,961 thousand Euros, of which 11,748 thousand Euros correspond with additions
SandoMemo07.indd 171 of the year. 23/07/2008 11:33:27 Additionally, the construction of a parking lot continued in 2007 for exploitation as a concession, en- tered in the section “Advances and current fixed assets” for the sum of approximately 7, 195 thousand Euros of which 4,539 thousand Euros correspond with additions to this year.
Furthermore, during 2007 construction began on the part of companies of the Group dedicated to concessions of buildings for later exploitation as concessions, included in the section “Advances and current fixed assets” for the sum of 12,953 thousand Euros.
The totality of the chapter “Withdrawals” of the above table correspond to sales and removal of speci- fic assets by the different companies of the Group. The net profits generated by these sales of assets totalled 3,781 thousand Euros and entered as profit or loss according to the results of each operation, in the section “Profits from fixed assets” and “Losses from fixed assets” respectively in the consolidated profit and loss account of the year 2007.
The fixed material assets which are totally amortised at December 31, 2007 are the following:
Thousands of Euros
Constructions 22.421 Technical installations and machinery 17.791 Other fixed assets 9.184 49.396
Included in the section “Property and Constructions” is land whose net value totals 2,163 thousand Euros which is under a non-transferable mortgage with a total pending capital of 243 thousand Euros at December 31, 2007. (see note 15)
Additionally, the sections “Property and Constructions” and “Advances and current fixed material assets” include the sum of 85,584 thousand Euros and 27,146 thousand Euros respectively, for two properties which are mortgaged with a combined pending capital at December 31, 2007 of 62,249 thousand Euros. (see note 15) 8. Fixed financial assets
The movements during the year 2007 in the section “Fixed financial assets” and “Temporary financial investments” are the following:
Thousands of Euros
Balance at Additions Entries from Transfers Withdrawals Participation Balance at 31.12. 2006 mergers in annual 31.12 2007 results (Note 19)
Financial fixed assets Participation in equivalence (note 1)
Long term asset portfolio Other loans Provisions
Temporary Financial investments Short term asset portfolio
Loans to companies in equivalence Other loans
Among the most significant additions to the “Portfolio of long term assets” is the acquisition of shares in Naviera Zierbena, AIE and Naviera Mende C-1655, AIE for the total sum of 13,746 thousand Euros of which the payment of 13,639 thousand Euros remains pending, entered in the sections “Other long term creditors – pending share payments” and “Other non-commercial debts – pending share payments” of the liabilities of the consolidated balance sheet at December 31, 2007 (see note 16). Furthermore, in relation to these shares, the Group has made a provision for losses during 2007 of 4,332 thousand Euros, entered in the section “Variation of provisions for financial investments” in the consolidated profit and loss account for 2007.
SandoMemo07.indd 173 23/07/2008 11:33:28 Of the additions in “Other long term debts” is an entry for 21,639 thousand Euros corresponding to the merger process in the absorption of the companies Agofer S.L., Avanza Grupo Inmobilario S.L. and Nueva Dimension Empresarial S.L. acquired during the year.
The details of the “Fixed financial assets – portfolio of long term assets” is as follows:
Thousands of Euros Company Percentage of Cost Provision Net Holdings
Other holdings
The balance of the section “Fixed financial assets – Other loans” at December 31, 2007 includes fun- damentally, certain sums to be collected from companies in the same Decision Unit for the sum of 10,480 thousand Euros, as well as other outstanding sums to be collected over the long term for the sale of assets.
The movements in the section “Temporary financial investments – Other loans”, as with the balance at the end of the year, corresponds, principally, to investments in shares and fixed term investments generated from treasury revenues from certain UTEs. These investments have been earning at a fixed market rate.
SandoMemo07.indd 174 23/07/2008 11:33:28 9. Inventory
The composition by activity in this section of the consolidated balance sheet at December31, 2007 is as follows:
Thousands of Euros Construction Real estate Other Balance at Balance at Variation Activity promotion activities 31.12.07 31.12.06 activity
Prime materials and other supplies Land and parcels Initial project costs
Current or terminated projects
Current long cycle projects
Current short cycle projects Buildings constructed Advances to suppliers Provisions Adjustments in consolidation
The details of the variations in the inventory section of the consolidated balance sheet at December 31, 2007 are as follows:
Thousands of Euros Variation in Additions from Added value from Total Inventory merger (***) merger (***)
Prime materials and other supplies Land and parcels Initial project costs Current or terminated projects Current long cycle projects Current short cycle projects Buildings constructed Adjustments in consolidation
(*) the totality of the variations of finished products and current products for the sum of 83,878 thousand Euros was entered in the section “Increase in inventory for current and finished products” of the consolida- ted profit and loss account of 2007.
(**) see note 19-a
(***) see note 1
SandoMemo07.indd 175 23/07/2008 11:33:28 The section “Property and parcels” of the above table includes the 9.6% pro indiviso (together with other Andalucian Promoters) of the rustic zones parcel known as TABLADA in the Municipality of Sevilla with a total area of 3,117,673m2. The sums activated for siad parcel at December 31, 2006 by Construcciones Sanchez Dominguez – SANDO S.A. (Sole proprietorship company) was 9,350 thou- sand Euros. The session of the Council of Urbanism of the Municipality of Sevilla held on June 20, 2001, initially approved the partial delimitation of the land reserved as rural (not for development) for possible acquisition for incorporation into the Municipal Land Holding, called SNU-TR 101 (TABLADA). The entirety of the land acquired by the company falls within this delimited area. While the company administrators hope to recover the sum invested in said land, following the prudence principle, a provision for depreciation has been made for the sum of 9,132 thousand Euros, with the result that the net accounting value of the parcel corresponds to the latest estimation of the true value of the parcel.
Certain inventory of the “real estate promotion activity” of the table above, presented in the sections “Buildings constructed” and “Buildings under construction” at December 31, 2007 for the sum of 79,778 thousand Euros and 93,017 thousand Euros respectively, are under non-transferable mortgages with a limit of 297,755 thousand Euros, raising the balance at December 31, 2007 to 175,046 thousand Euros. Of this sum, 149,873 thousand Euros corresponds to loans guaranteed with promotions which were sold in 2007 and are therefore eliminated as inventory as these are substantially completed and will be registered during 2008. (Note 15).
Also included in the inventory presented in the section “Buildings constructed” and “Buildings under construction” at December 31, 2007, are various promotions for the sum of 30,685 thousand Euros and 97,140 thousand Euros respectively which are under non-transferable mortgages totalling 232,697 thousand Euros, raising the balance at December 31, 2007 to 134,770 thousand Euros. (Note 15).
Furthermore, inventory for “real estate promotion activities” of the table above, presented in section “Buildings constructed” at December 31, 2007, for the sum of 2,571 thousand Euros are mortgaged for a total of 21,494 thousand Euros, raising the balance at December 31, 2007 to 9,145 thousand Euros. Of this sum, 5,547 thousand Euros corresponds to loans guaranteed with promotions which were sold in 2007 and are therefore eliminated as inventory as these are substantially completed and will be registered during 2008. (note 15).
Certain properties entered in the section “Property and parcels” and “Buildings under construction” at December 31, 2007, for the sum of 247,164 thousand Euros are under non-transferable mortgages totalling 94,761 thousand Euros at December 31, 2007. (note 15). Additionally, there are parcels re- gistered in the section “ Property and parcels” at December 31, 2007 for the sum of 38,658 thousand Euros which are under transferable mortgages totalling 55,160 thousand Euros. (note 15)
At December 31, 2007, there are advances to suppliers of property inventory suppliers registered for the sum of 31,710 thousand Euros. The sum of purchases to be made linked to these advances, inclu- ding the amount mentioned, totals 232,728 thousand Euros.
According to the valuations available at the date, the Administrators consider that there are no losses related with the inventory which has not been fully provisioned for. 10. Clients by sales and services provided
The composition of the section “Clients by sales and services provided” of the assets of the consolida- ted balance sheet at December 31, 2007 by type of activity is as follows:
Thousands of Euros Balances pending collection: Certified projects and services 280.942 Real estate activity 214.614 Other activity 84.596 580.152 Executed projects pending certification 40.771 620.923
The section “Certified projects and services” of the table above indicates the sum of the certifications performed for clients by executed projects and services performed, pending payment on the date of the consolidated balance sheet. The section “Executed projects and services pending certification” indicates the difference at the close of the year between the production and origin of each of the projects and services in execution at December 31, 2007 and the totals of the original certifications emitted. As a consequence, the total of this account corresponds to the valuation at certification prices of the units of executed projects and services provided at the close of the year, as these are included in the principal or additional contract or modifications of the same approved by the client or where there is no doubt about approval, the- se will be certified in the coming months. Given that the income which will finally be received, with regard to projects in execution, are subject to certain factors whose ultimate effect cannot presently be objectively determined, such as the final sums collected in terms of liquidation, reforms, additions, price revisions, etc, the Group follows the criteria of recognising the income corresponding to those project units which have not supported by signed contracts for the property, in the year in which they are approved, or when the company of the group considers there are not doubts as to recovery through future certifications.
11. Debts and Loans with Companies in equivalence
The balances of debts and loans the companies of the Group have with associated companies are the following:
Thousands of Euros Payables Receivables Balance Balance
SandoMemo07.indd 177 23/07/2008 11:33:28 12. Equity
The movements in the equity of the consolidated Group during the year 2007 are provided below:
Thousands of Euros Share capital Reserves of Reserves of Reserves of Conversion Annual Total Parent company Global consolidated companies in differences results Equity companies equivalence
Balance 31.12.06 Distribution of results of the previous year
Distribution of dividends
Addition by conversion differences
Net annual revenues Balance 31.12.07
Share capital
The share capital of the Parent Company “Grupo Empresarial Sando S.L.” is represented by 733,301 ordinary shares with a nominal value of 50 Euros each, fully subscribed at December 31, 2007.
SandoMemo07.indd 178 23/07/2008 11:33:28 Reserves in companies consolidated through global integration
The list of companies within the consolidated group under the section “Reserves in consolidated companies through global and proportional integration” is as follows:
Thousands of Euros
Legal reserve
For all issues related to limited liability companies not included in the Limited Liability Companies Act will be applied Chapter VII of the Incorporated Companies Act. In accordance with the Renewed Text of the Incorporated Companies Act, a sum equal to 10% of annual profits must be dedicated to a legal reserve until this reaches a total of at least 20% of company share capital.
SandoMemo07.indd 179 23/07/2008 11:33:28 According to article 74 of the Limited Liability Companies Act, the total balance of the legal reserve may be used to increase the share capital of the company. With the exception of the purpose men- tioned, and while this does not exceed 20% of the share capital, this reserve can only be used to com- pensate for losses, providing no other reserves are available for this purpose.
The balance of the mentioned legal reserves of the consolidated companies, totalling 5,804 thousand Euros, was eliminated in the consolidation process, being incorporated into the reserves in the com- panies consolidated by global integration.
13. External partners
This indicates the stake of minority partners or shareholders in the consolidated subsidiaries. Further- more, the balance shown in the consolidated profit and loss account in the section “Results attributed to external partners (profits)” represents the stake of said minority shareholders in the annual results.
The movements during the year 2007 in this section of the consolidated balance sheet are the follo- wing:
Thousands of Euros Initial Results attributed Additions Withdrawals Final Balance Balance to external partners
Additionally, the list of balances at December 31, 2007 in this section of the consolidated balance sheet is provided below:
Thousands of Euros Capital Reserves Results Final balance
SandoMemo07.indd 180 23/07/2008 11:33:28 14. Provisions for risks and costs
The movements in the section “Provisions for risks and costs” of the liabilities in the consolidated ba- lance sheet are provided below:
Thousands of Euros 31.12.06 Provisions Applications 31.12.07
Provisions for risk and responsibilities Retirement bonus Tax provisions Quarry restoration Reversion fund Total
15. Debits with lending entities
The details of the “Loans and other debts” at December 31, 2007, both short and long term, are the following:
Thousands of Euros Balances pending maturity 31.12.07 Type of operation Annual interest rate Nominal or limit Short term Long term Total provided
Mortgages Transferable mortgages Syndicated loans Credit accounts Debts by discounts Personal loans
Creditors by financial leasing Accrued interest pending
SandoMemo07.indd 181 23/07/2008 11:33:28 During the year 2007, the company of the Group “Sando Desarollos Inmobilarios S.A. (Sole proprie- torship company)” subscribed a syndicated loan with a syndicate of Credit Entities for the sum of 220 million Euros, for the financing of acquisition of the companies Agofer S.L., Avanza Grupo Inmobilario S.L. and Nueva Dimension Empresarial S.L. absorbed into the Group. (Note 1). The interest rate applied is the Eurobor plus a differential which varies according to the ratio of “net financial position between asset market value” of certain companies of the Group engaging in real estate activities. The loan is subject to compliance with said ratio calculated according to the terms established in the loan contract, payable on demand of the syndicate in the case of non-compliance. The Administrators estimate that at December 31, 2007, and at the date of the preparation of these consolidated annual accounts, the conditions established are met, and there is no doubt as to the capacity of the Group to maintain compliance throughout the established amortisation period. The companies of the group acting as guarantors at December 31, 2007 of the syndicated loan are the following:
Grupo Empresarial Sando S.L. Sando Diversificacion S.L. Construcciones Sanchez Dominguez – SANDO S.A. Aridos y reforestacion S.A. Construcciones, Asfaltos y Control S.A.
As indicated in Note 23, in February 2008 the company amortised the first section of the loan for the sum of 100 million Euros.
The non transferable mortgages are guaranteed by elements of the material fixed assets, intangible fixed assets and property and current projects of the Group, (notes 6,7 and9), as well as certain properties of the companies part of the Decision Unit whose parent company is Grupo Empresarial Sando S.L.
The maturity of the long term loans with lending entities is the following:
Creditors by financial leasing Mortgages
Transferable mortgages Syndicated loans Credit accounts
Debts by discounts personal loans
The Company follows the criteria of registering as short term the transferable mortgages of its real estate promotions corresponding to the buildings which, depending on their situation, are estimated to be provided to their buyers in the next twelve months, maintaining the original maturity of loans for the rest.
SandoMemo07.indd 182 23/07/2008 11:33:28 16. Other creditors
The composition of the balance at December 31, 2007 of the section “Long term creditors – other creditors” of the liabilities of the consolidated balance sheet is the following:
Thousands of Euros
Debts pending Other debt Financing and deposits received Payments pending on shares
The maturity of the section “Long term creditors – other creditors” is the following:
Thousands of Euros Indeterminate
Debts pending Other debt Financing and deposits received Payments pending on shares
(*) Of these sums, 34,845 thousand Euros corresponds to the delayed payment of certain inventory acquisitions consisting in parcels and property, while 7,080 thousand Euros refers to advances to clients for promotions to be delivered in 2009. (**)Corresponds to shares whose period of payment is not fixed at the date of preparation of these annual accounts, estima- ted in any case by the Administrators of the subsidiary company holding the shares and those of the Matrix which will not be demanded during the next year.
The details of the payment pending for shares in companies in equivalence and the long term share portfolio are as follows: Thousands of Euros Short term Long term payments payments Company pending (*) pending
(*) Included in the section “Other non-commercial debt” of the liabilities of the consolidated balance sheet.
SandoMemo07.indd 183 23/07/2008 11:33:28 The details of the section “Commercial creditors” for short term liabilities in the consolidated balance sheet at December 31, 2007 are the following
Thousands of Euros Commercial creditors Advances received for orders Advances for projects Certified project pending execution Advances for property sales Other advances
Debts for purchases and services Debts represented by pending payments
17. Fiscal situation
Corporate tax is calculated based on the economic or accounting results before taxes, obtained through the application of generally accepted accounting principles, which does not necessarily co- incide with the fiscal results, understood as the taxable base.
Since January 1, 2003, the Group “Grupo Empresarial Sando S.L. and Sociedades dependientes” has presented its Corporate Tax declaration as a consolidated tax declaration with those companies in which the Group has holdings greater than 75%.
SandoMemo07.indd 184 23/07/2008 11:33:28 The companies of the Group “Grupo Empresarial Sando S.L. and Sociedades dependientes” making a consolidated Corporate Tax declaration are the following:
Share holdings
Matrix
SandoMemo07.indd 185 23/07/2008 11:33:29 The conciliation of consolidated accounting results with the taxable base of the companies is as fo- llows:
Thousands of Euros
Pre-tax aggregate results Adjustments during consolidation Permanent differences Net effect on taxable base UTEs 2007 (losses) (*) Net effect on taxable base UTEs 2006 (profits) (*)
Taxable base at tax rate 32.5% Taxable base at tax rate 19% Taxable base at tax rate 0% Taxable base at tax rate 30% Total liquid quota Deductions Adjustments on revenues Adjustments for changed tax rate Fiscal adjustments for account consolidation Corporate tax costs Temporal differences (quota) Differences for changed tax rate and taxable revenues Fiscal adjustments for account consolidation Retention and payments made Payment pending to Tax Authorities
(*) certain companies of the Group, under Article 76.2 of the Corporate Taxation Act, Law 43/1995 opted in the year 1999 to impute the taxable base proceeding from the UTEs in the taxation period in which their annual accounts were approved. This criteria must be maintained for at least three years.
The Law 34/2008, November 28, on the Taxation of Physical Personas and the partial modification of the corporate tax laws, tax on non residents and wealth tax establishes, among other aspects, the reduction over two years of the general corporate tax rate which until December 31, 2006 stood at 35% so that said tax rate is established in the following form:
Tax periods starting Tax rate Jan1, 2007 32,5% Jan 1, 2008 30%
SandoMemo07.indd 186 23/07/2008 11:33:29 For this reason, during the year 2007, the Companies have proceeded to re-evaluate, taking into ac- count the year in which it is estimated the corresponding reversion will take place, the sum of anti- cipated and deferred taxes as well as the taxable credits accounted in the current account balance. Consequently, a positive adjustment in the tax rate for profits has been registered in the section Costs for corporate taxation of the profit and loss account for the sum of 7,403 thousand Euros.
During 2006 and 2007, the tax authorities began an inspection to verify certain taxes and fiscal years of certain companies of the group. At the date of the preparation of the annual accounts, the follo- wing action by the company remain pending:
Tax Verification Period
Sando Proyectos Inmobilarios SA Tax on Corporations VAT
Construcciones Sanchez Dominguez – SANDO SA
Retention/income on property assets
Retention/income on property leasing Retention on non-residents Annual operations declaration Corporate tax VAT
Retention/income on work and professional activities
At the date of preparation of the annual accounts the following tax inspection have be finalised without significant negative consequences for the different companies:
Tax Verification Period
Sando Proyectos Inmobilarios SA
Retention/income on work and professional activities
Retention/income on property assets VAT
Construcciones Sanchez Dominguez – SANDO SA
Retention/income on work and professional activities
SandoMemo07.indd 187 23/07/2008 11:33:29 Inspections of the Group’s corporate tax declarations are ongoing for all the years since 2003 and its declarations of all other applicable taxes from the last four years are also under inspection, with the exception of those indicated above. As a consequence of the revisions pending by the tax authorities, the Companies may incur certain fiscal and legal liabilities and contingencies, the results of which are impossible to objectively quantify. In the opinion of the Administrators of the Parent Company and Subsidiary companies, these liabilities and contingencies will not have a significant impact on the annual consolidated accounts.
18. Guarantees to third parties
At December 31, 2007, the consolidated companies have provided guarantees to third parties for a sum of approximately 417,547 thousand Euros, fundamentally for the execution and termination of projects.
At the date of closure, there are no additional guarantees for the purchase of land or assets.
19. Income and Expenditures
a) Consumables and Other External Costs
The composition of the balance of “Supply” in the consolidated profit and loss account for the year 2007 is as follows:
Thousands of Euros
Consumables and other external costs Variation on inventory of land and parcels
Variation on inventory of prime materials and other supplies
(*) see note 9 b) Revenues
The distribution of the net revenues by business activity, once the operation between companies have been eliminated for 2007 is as follows:
Business Areas Thousands of Euros
Construction Real estate Environment Concessions Sale of Aggregates Sale of cements Asphalt Transport Other
SandoMemo07.indd 188 23/07/2008 11:33:29 The distribution of revenues by geographical area is as follows:
Country Thousands of Euros Spain 887.380 Poland 13.518 900.898
The whole of the net revenues in Spain was earned in the Autonomous Communities of Andalucia, Madrid, Cataluña, Castilla-Leon, Castilla-La Mancha and Murcia.
Of total revenues, the sum of 226,004 thousand Euros, corresponding to the proportional integration of the projects executed by the Temporary Union of Companies.
c) Results of the Consolidation
The contribution of companies included within the consolidated group to the results of 2007 are as follows:
Thousands of Euros
(follows)
SandoMemo07.indd 189 23/07/2008 11:33:29 Thousands of Euros
Adjustments for consolidation:
Consolidated earnings from integrated companies
Participation in earnings from companies in equivalence Consolidated annual profits Results attributed to external partners Profits attributed to Parent Company
SandoMemo07.indd 190 23/07/2008 11:33:29 d) Other operating expenses
The fees related to the auditing services for the individual accounts of the matrix company of the Group and consolidated accounts was 24 thousand Euros (including services provided for revision limited to certain companies of the Group). The fees related to auditing services of the rest of the individual companies of the Group are indicated in the Annual Accounts of each company with the exception of the accounts auditing for foreign companies, the fees of which for 2007 totalled 36 thou- sand Euros.
During 2007, additional fees of 415 thousand Euros were paid for other professional services provided to the Companies by other companies linked to the auditor.
e) Variation in traffic provisions-
The composition of the section “Variation in traffic provisions” of the consolidated profit and loss ac- count for the year 2007 is as follows:
Thousands of Euros
Variation of provisions for insolvency Variation on provisions for inventory Losses from unrecoverable loans Variation on other traffic provisions
The movements during 2007 of the provisions entered in the section “Provisions for other traffic ope- rations” of the liabilities of the consolidated balance sheet at December 31, 2007 as well as the details of the entry “Variation of other traffic provisions” in the table above are presented below:
Thousands of Euros
Balance at 31.12.06
Provisions against the consolidated profit and loss account Recoveries Variation on other traffic provisions Additions by merger Balance 31.12.07
SandoMemo07.indd 191 23/07/2008 11:33:29 f) Personnel costs
The details of the section “Social expenditures” for the companies of the Group during 2007 are pre- sented below:
Thousands of Euros
Social Security Other social costs
The average staff levels of the Group during 2007 by categories are the following:
Average Average UTEs Total Men Women
Directors / middle managers Personnel director / manager Administration manager 2º Admin official1º / draftsman 1º Foreman / draftsman 2º/Specialist Admin official 2º/ trade official 1º Admin assit. / technical assit. Assistant / worker
The average total staff, corresponding to UTEs personnel is approximately 455 persons.
g) Order portfolio
The total sum of the order portfolio of the Group for construction activity at December 31, 2007 is as follows: Thousands of Euros
In execution Production at origin Project pending execution
Contracted projects pending execution
Total Order Portfolio pending execution
SandoMemo07.indd 192 23/07/2008 11:33:29 The details of the order portfolio by order type at December 31, 2007 are provided below:
Residential project Non residential project Civil engineering Reforestation, landscaping, environment
20. Temporary Union of Companies
The principal Temporary Union of Companies currently active, in which certain companies of the Group are participating at December 31, 2007 are the following: Percentage Production Production of participation at origin contracted
SandoMemo07.indd 193 23/07/2008 11:33:29 Percentage Production Production of participation at origin contracted
The Group has integrated into its consolidated current account balance and its consolidated profit and loss account the proportional part of the balances and profit and loss accounts of the operatio- ns of the Temporary Union of Companies with which it participates according to the percentage of participation. This balances of reciprocal assets and liabilities have been eliminated as well as earning and expenditures.
21. Environment
The significant information related to prevention, reduction and reparation in the area of the environ- ment derived from the various activities of the Group are provided in the following table:
Thousands of Euros
Liabilities derived from Environmental actions Provisions for risk and costs
Costs derived from Environmental actions Provisions for risk and costs (other operating costs) Other operating costs
The total accrued liabilities in the area of environment is an estimation, as of December 31, 2007 of the costs of restoring quarries operated by the companies of the Group whose principal activity is the extraction and sale of aggregates (see note 4-s).
There are no significant costs incurred for the assets of the various companies of the Group as a con- sequence of the protection or improvement of the environment.
SandoMemo07.indd 194 23/07/2008 11:33:29
SandoMemo07.indd 194 23/07/2008 11:33:29 22. Remuneration and other services to the Board of Directors
During the year 2007, the companies of the Group registered 612,054 Euros in remuneration for the members of the Board of Directors of the Parent Company of the Group, without accrued remunera- tion for the administrators of the other consolidated companies.
The sums at December 31, 2007 debits that the members of the Board of Directors of the Parent Company maintain with the companies of the group totals 2,840,546 Euros. Additionally, certain com- panies of the Group maintain accounts to pay the members of the Board of Directors of the Parent Company with a total of 596,854 Euros.
At December 31, 2007, there are no obligations contracted in the area of pensions or life insurance with respect to former or current members of the Board of Directors or the Sole Administrators of the various companies of the Group. The Board of Directors consists of, by sex, three women and three men.
23. Other information
The Group executes a centralised management of its financial and treasury position, assigning the available financial resources to the various companies according to periodic need.
The portfolio of orders of the companies dedicated to construction and the environment totals some 1,071 million Euros, a 14% increase over the previous year, thus guaranteeing a significant generation of resources.
The Group has recently formulated a Strategic Plan for 2008-2012, establishing for the first two years of this period an organisational and financial consolidation policy including the limitation of invest- ments.
The Group has amortised the first section of the syndicated loan, one hundred million Euros, upon maturity in February 2008. The short term loans, which matured before the preparation of these ac- counts and which suppose a significant part of the total of the same, have been renewed and even increased in some cases as the Administrators do not foresee any difficulties in the renovation of bank liabilities in the short term.
The budgets of the different business areas indicate a positive net growth in resources in 2008 which, in accordance with said budgets, predict a positive net balance of payments of over 10 million Euros. Considering this sum, as well as the sums available in the credit accounts which have been renewed, or which will be renewed of contracted in 2008, and the treasury balances, the net position of the company will exceed at the end of 2008 some 50 million Euros according to budget estimates. 24. Financing
The following table indicates the financing structure corresponding to the year 2007 as well as the figures from 2006:
APPLICATIONS ORIGIN
Shareholders by non-required payments Resources from operations Attributed to Parent Company Entries by merger Attributed to external partners Establishment costs Intangible fixed assets Shareholders by non-required payments Material fixed assets Financial fixed assets Changes in consolidation perimeter Interests of external partners Acquisitions of assets Establishment costs Changes in consolidation perimeter Intangible fixed assets establishment costs Material fixed assets intangible fixed assets Financial fixed assets material fixed assets Financial fixed assets Transfer of inventory to fixed assets Dividends to companies in equivalence
Additions to commercial consolidation fund Transfer of assets intangible fixed assets Costs distributed over various years Material fixed assets financial fixed assets Reduction of external partners Transfers of assets to inventory Conversion differences Cancellation or short term transfer of financial assets
Transfer of shares in consolidated companies
Income distributed over various years
Long term variation of debt Conversion differences TOTAL APPLICATIONS TOTAL ORIGINS EXCESS OF ORIGINS ON APPLICATIONS EXCESS OF APPLICATIONS ON ORIGINS (INCREASE OF CIRCULATING ASSETS) (DECREASE IN CIRCULATING ASSETS) TOTAL TOTAL
Increases Decreases Increases Decreases Inventory Debtors Creditors Temporary Financial Investments Treasury Adjustments for periods TOTAL VARIATION ON CIRCULATION ASSETS
SandoMemo07.indd 196 23/07/2008 11:33:30 The resources from the operations have the following composition:
Annual earnings
Increases Provisions for amortisation of fixed assets Provisions for commercial consolidation fund Losses on assets Amortisation of costs over various years Provisions for risk and costs Provisions for financial fixed assets Provisions for tangible and intangible fixed assets
Reductions Application of provisions for financial fixed assets Profits from fixed assets Profits from transfer of consolidated companies from global or proportional integration Profits from companies in equivalence Excess provisions for risk and costs Income distributed over various years
Resources proceeding/applied to operations
SandoMemo07.indd 197 23/07/2008 11:33:30 Grupo Empresarial Sando S.L. and Subsidiary Companies
Management Report for year Ending December 31, 2007
Evolution of business and situation of the Group
During the year 2007, the Group acquired the “Grupo Agofer”, dedicated primarily to real estate activi- ty, with its companies merged by absorption into the other companies of the Group. This acquisition has permitted a significant increase in the property portfolio of the Group as well as to expand the geographical area of operation of the real estate activity.
The total consolidated turnover for the year 2007 reached 901 million Euros, which supposes an in- crease over the previous year of approximately 37%. Additionally, the levels of profitability have been improved, passing from a profit margin of 8% in 2006 to 12% in 2007.
The increase in the results of the ordinary activities with regard to 2006 was 25%, despite the signi- ficant increase in financial costs, derived from the increase in interest rates and the increase in the volume of bank financing (to finance corporate acquisitions and real estate activity). The after tax profit of the previous year was superior to this year as a result of extraordinary operations, the sale of certain shareholdings.
Future prospects
The Group’s strategy to diversify its business areas and geographical markets will continue in the co- ming years.
The turnover for the Construction area is expected to see a significant increase in comparison with the previous year, thanks to the execution of the projects in portfolio and the adjudication of new projects as well as the increase in participation in Temporary Unions of Companies, with more long term growth expectations, in line with the evolution of the construction area and the development of services activities.
Additionally, the maintenance and consolidation of real estate activity is predicted despite the de- licate situation of the sector and the Spanish economy in general. This will be possible taking into account that approximately 1,000 units will be terminated during the course of the year, of which 800 were sold in previous years. The Group has also diversified its geographical markets (national and international) as well as the variety and quality of its products.
The Administrators of the Group consider that sufficient provision has been made for the risks intrinsic to the business of the Group. With regard to an analysis of these and how they have been mitigated, the following should be noted: • At December 31, 2007 the Group has an ample portfolio of orders for the sum of 1,370 million Euros (46% over the previous year) supposing 2.5 years of production based on the construction sales of the year 2007. • The companies of the Group dedicated to construction maintain a policy of prudence in relation to the recognition of production corresponding to non-firm contracts. • The Group has an ample strategic reserve as well as adequate geographical diversification.
Furthermore, the Group has undertaken a significant project to redesign its corporate management system, based on IT applications, which will permit an increase in the information available for the management of activities and future decision-making. The creation of a new internal auditing depar- tment will also contribute to this process as well as the development of a management control area and other significant actions designed to reinforce and support the operative areas of the Group.
The average staff levels during 2007 were 2,417 people, including UTEs.
The company continues to advance in the diversification of its activities, making a decisive effort to expand into the area of construction and the exploitation of administrative concessions.
Events after closure of the year
No significant events occurred after the closure of the fiscal year 2007 other than those indicated in the report.
Technological activities
The Companies of the Group have not made significant investments in the area of research and de- velopment during 2007.
Acquisition of own shares
No operation for the acquisition of shares was taken during 2007 for any companies of the Group.
Use of financial instruments
The Companies of the Group do not possess any financial derivatives nor interst rate coverage instru- ments. annex CORPORATE SOCIAL RESPONSIBILITY
Vision Activities related to civil society Activities related to the Environment Activities related to personnel management report 07sando
202 corporate social responsibility
Vision
The goal of the strategic management of the Sando group is to find a balance between the economic and the social, working to assist in the development of the communities in which the group operates, generating employment and wealth.
The company’s Corporate Social Responsibility initiatives are primarily channelled through the Sando Foundation. This non profit organisation was founded in 2006 and has continued the philosophy and policies of Sando: share benefits with society and company personnel, through actions which favour economic development, human rights, culture and the environment.
Sando has assumed the following obligations in accordance with its business principles:
• Co-ordinate the activities of the company in order to combine conservationist and environmenta- lly sound practices with its production processes.
• Reinvest part of its business profits in activities which benefit society as a whole.
• Work to improve the working conditions of Sando employees with special emphasis on workplace risk prevention.
• Advance in finding a balance between professional and personal responsibilities.
During 2007, Sando made investments in Corporate Social Responsibility for close to five hundred thousand Euros.
Sponsorship Activities Total External training activities 30.032,00 Cultural and Heritage activities 122.198,50 Social and Environmental activities 227.048,90 Sports activities 114.330,36 Total 493.609,76
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Activities related to civil society
Sando continues to support, organise and manage activities that contribute to the welfare of society as a whole. The activities include:
Every year Sando renews its commitment to the smallest members of society with actions such as the processions of the Reyes Magos in various points in Andalucia, including provincial capitals, Sevilla and some smaller municipalities.
The education of future generations and the correct professional orientation is a key interest of com- panies like Sando, whose main asset is its human resources. The company has once again participated in the Open Doors Event of the University of Malaga.
Arts education and promotion are a fundamental part of culture, and the Sando group has maintai- ned its support for the Fundación Española del Ferrocarril, on this occasion sponsoring the photogra- phy contest Caminos de Hierro.
During this year, Sando has once again demonstrated its interest in sporting events, participating in various tournaments, regattas and racing competitions, including the Malaga City Marathon or the sports, culture and social program of the Municipality of La Rinconada, in Sevilla.
Within its R&D+I activities, Sando has continued to initiate new projects to support of research and development and technology transfer.
During 2007, and in consonance with its international expansion, Sando sponsored the economic and social forum held among the principal companies in Poland.
Sando participated in a number of congresses and conferences related to the sector during the cour- se of 2007, supporting the promotion of the latest technological advances.
The company also reached several agreements with universities during 2007 in order to promote education and training through grants and participating in specific teaching initiatives, such as the apprenticeship program in the Joint Risk Prevention Service.
Furthermore, Sando has maintained close ties with the various administrations for general studies and those related to the sector through the conduct of surveys related to risk prevention, thus acting on the future reality of the sector.
The company is also active in social and cultural causes such as that carried out in the Polígono Sur area of Sevilla with the renovation of the Church of San Pío X.
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Through the Fundación Malaga, Sando participated in the decoration project for the interiors of the Ermita de la Virgen de los Remedios in Vélez-Malaga, the work of the famed painter Evaristo Guerra.
Finally, the company actively participates in specialised forums such as the Risk Prevention Commis- sions of various national, regional and provincial associations.
The Sando Foundation
The company has undertaken its cultural, social and environmental initiatives through the Sando Foundation:
In co-ordination with the Real Estate division, the foundation has reached a partnership agreement with Ayuda en Acción for a radio broadcasting project in Kenya. The Real Estate division dedicates 0.7% of its sales during Real Estate Fares of Madrid and Malaga to the Dadaab-Kenia Radio project.
The Sando Foundation has brought classical music to the streets, offering benefit concerts in Malaga and Sevilla. It is also working in partnership with the Fundación Antares Foro in the organisation of a Flamenco gala performance.
The company supported the cultural program Don Juan, Legends of Sevilla, with an extensive pro- gram of zarzuelas, theatre, exhibitions and various activities related to the figure of Don Juan.
At the end of 2007, Sando sponsored the II Master’s Tennis Tournament of Malaga, a sporting event drawing the elite tennis players from throughout Spain.
In the social area, the Foundation participated with Proyecto Hombre in the organisation of the Golf Pro-Am Tournament Miguel Ángel Jiménez, and other projects at Christmas in benefit of marginal neighbourhoods.
Activities related to the environment
The respect and defence of the environment is a key element in the Corporate Social Responsibility policy of Sando. Since the beginning, the company has pursued its business activities applying the methods and controls necessary to minimise environmental impact and contribute to the regenera- tion of natural spaces.
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Committed to meeting the demands of society, Sando is focussing on sustainable development in order to pass on the natural environment to future generations. The company participates with com- petent organisations, complying and exceeding legal and environmental standards. Sando’s activities in this area are defined by the following:
• Commitment to continuous improvement, fixing annual objectives and benchmarks. • Gradual incorporation of recycled and recyclable materials. • Investments of nearly four hundred thousand Euos in the renovation of climatisation systems in the Malaga offices in order to reduce CO2 emissions. • Rational use of energy resources and promoting savings. • Integration of suppliers and contractors into environmental objectives. • Establishment of the necessary mechanisms to prevent pollution during operations. • Reduction of environmental impact of projects during execution. • Maintain Environmental Management Systems, according to ISO-14001, in its representative com- panies and increasing certifications each year. • Recycling and gradual reduction of paper use, improving productivity and reducing environmen- tal impact. • Collection of technological waste in authorised recycling points.
Each year Sando renews its commitment to the environment and sustainability with various activities, promoting external conferences with experts such as the International Drought Forum held this year in Sevilla.
Activities related to personnel
A company like Sando, with over 2,200 professionals on staff, understands that its human resources are the key asset of the organisation. Sando’s team is characterised by its solidarity, teamwork efficien- cy, competitiveness and productivity.
The staff of Sando is an essential part of the company and policies have been established to find a better balance between professional and personal responsibilities by providing the maxim of facilities to employees.
Since the creation of the Sando Foundation, social actions have been reinforced by a series of initia- tives designed to improve the professional and personal conditions of the entire staff. During 2007 many events were held, including a drawing and painting contest, the End of Studies award, the Risk Prevention Conference, etc.
206 corporate social responsibility
Workplace Health and Safety Conference of the Sando Foundation
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Vision
Sando understands development from the perspective of sustainability which balances business ope- rations with the need to preserve natural resources and the environment for future generations. The Sando Foundation was created based on these principles and is the channel for the social action of the group.
Social Objectives
The wish of the Foundation is to invest in society and the surrounding areas part of the profits earned by Sando to contribute to the creation of a better world.
The Sando Foundation was created with the intention of conducting actions within Spain in the short term and in the medium term the areas where the Sando group is active.
The Foundation was created at the end of 2006 with a double purpose. Firstly, to integrate and mana- ge the actions Sando is carrying out in partnership with other institutions and secondly to promote new activities to benefit the environment, and social causes and cultural events.
The Foundation has designed a plan around two main groups of beneficiaries: the employees and staff of the company and society as a whole.
Activities aimed at Sando personnel are integrated into the Internal Social Action of the Foundation whose objective is to improve the professional and personal conditions of persons forming part of the company. These initiatives pursued through actions which unite and bind our team together, focussing on the values of solidarity, respect, efficiency and productivity.
Furthermore, Sando’s activities aimed at society at large are integrated into a program of External Social Action. The Foundation aims to contribute actively to improve the environment, labour rights, encourage workplace health and safety, promote research and sustainable development and the preservation of the artistic and cultural heritage.
Activities
The Sando Foundation focuses on three types of the actions:
208 sando foundation
• Environmental, which together with research and development constitutes one of the key axes of the Foundation. It participates with other institutions and organisations, nationally and interna- tionally, to encourage and promote sustainability and a balance between development and the preservation of the natural environment. • Cultural. The Foundation conducts a range of activities for the preservation and diffusion of Spa- nish cultural and artistic heritage, independently or in partnerships with other institutions. • Social. The Foundation’s social activities promote humanitarian causes in the areas of health, edu- cation and sports with the aim of enhancing the quality of life in our communities.
Projects
The following projects were undertaken during 2007:
Benefit Concert
209 management report 07sando
Internal social action: • First children’s drawing and painting contest. • Workplace Risk Prevention Conference. • End of Study Awards. • Christmas Contest.
External social action: • Benefit concerts. • Sponsorship activities.
The Action Plan of the Sando Foundation for the year 2008 includes the following activities:
• Internal Social Action: Training and recreation courses, contests and awards directed at all mem- bers of the Sando team; awards for meeting workplace health and safety targets; didactic exhibi- tions in the company offices; Finalisation of Studies Awards, grants for further study, publications, promotion of sporting activities among group members, etc.
• External Social Action: National Construction Health and Safety Conference, participation in other foundations in the development and implementation of new sustainable technologies; exhibition on the Vías Verdes of Spain; citizens initiative awards; participation in the National Environmental Congress; a series of benefit concerts in favour of humanitarian causes; restoration of the Spanish artistic heritage and partnerships with institutions with similar aims of the Foundations regarding the preservation and education about the environment; the development of social sporting and health activities and the support of cultural initiatives.
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BARCELONA OFFICE SEVILLA OFFICE C/ Josep Plà, 2 Avda. S. Fco. Javier, 20 Pl. 2ª Mód. 227 Edif. B-3, 5º D Edif. Catalana Occidente - 41018 Sevilla 08019 Barcelona Tel. 95 464 63 89 - 95 492 13 15 Tel. 93 240 12 50 Fax 95 464 71 55 Fax 93 209 18 49 LA CABAÑA OFFICE Finca La Cabaña, s/n EXTREMADURA OFFICE 41300 La Rinconada (Sevilla) C/ Pío Baroja, 16 3ºA Tel. 955 794 201 06800 Mérida (Badajoz) Fax 955 794 216 Tel. 924 117 263 Fax 924 114 210
MADRID OFFICE VALENCIA OFFICE Avda. Manoteras, 46 2º Avda. Blasco Ibáñez, 10 Esc. A 1º 1ª 28050 Madrid 46010 Valencia Tel. 91 125 02 80 Tel. 96 339 20 76 – 96 339 34 19 Fax 91 344 21 58 Fax 96 369 39 60
MALAGA OFFICE WARSAW OFFICE Avda. José Ortega y Gasset, 112 Warsaw Financial Center Edif. Sando - 29006 Málaga Ul Emilii Plater, 53 Planta 29 Tel. 95 232 20 00 00 - 113 - Varsovia Fax 95 232 53 54 Tel. 0048 22 540 60 90 Fax 0048 22 540 60 91
MURCIA OFFICE C/ Central nº 13, 14 A. Edif. Torre Godoy 30100 El Espinardo. Murcia Tel. 96 885 87 84 Fax 96 830 66 52 www.sando.com
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