Dear Shareholders,

2017 was a fundamental year to consolidate the Group's growth and stability. Five years after the creation of a global Group, we can state that our imagination has transformed what seemed to be just a dream into reality. Today, this dream provides work to nearly 40,000 families in 50 countries. We grow everywhere and wish to do so continuously, along a path that we have traced by reaching both commercial and financial targets.

During this year, besides confirming the growth trend of our revenue, which reached €6.5 billion, we also strengthened our financial position. We refinanced €1.1 billion of our corporate debt by issuing bonds with a nominal amount of €500 million. We have equity, after the impairment of the Group’s assets in Venezuela, of nearly €1.1 billion, confirming our position as one of the industry's best financial structures. From a commercial point of view, we acquired many new orders, improving our risk profile both by reducing the revenue share of our main ten projects by 47% and by confirming the US as our main market. This was part of our broader business strategy that sees us focusing on markets with a more favourable risk-profit ratio.
In 2017, the Group's strategy was very effective as shown not just by the numbers and the attained results, but also by the market's acknowledgement. For the fifth year in a row, we were awarded the global leadership in the water sector by ENR, and we are one of the Top 10 companies in the transport and sewer/waste sectors.

For the future, we have set ourselves some strategic guidelines, among which: to keep our leadership in the water and metro sectors, while consolidating our position in the United States, the Middle East and Italy; we also intend to increase our market share in the United States, and to reposition Lane for the building of large infrastructure projects; we aim to reduce direct costs, optimise corporate costs and increase cash flow generation, to support the Group's growth by strengthening its financial solidity.

Our 2017 overall results make us proud. They prove that the strategy we have set for ourselves works, as it ties our growth to global megatrends. It is a winning strategy, which guarantees both short term results and economic and financial sustainability in the long-term.

If we look at the global scenario, we see that infrastructure is a confirmed essential lever for sustainable development within a context of economic recovery. In a context where the global GDP growth was 3.0% in 20171, the construction market went from USD2.9 trillion in 2016 to USD3.2 trillion in 2017. It is expected to reach USD3.5 trillion in 2018.

This construction market's growth meets the ongoing demanding needs linked to megatrends like urbanisation, water shortage and infrastructure ageing. Mass urbanisation is leading towards the growth of megacities. It is therefore increasing the demand for high-quality infrastructure connected to sustainable transport, like metros and railways. The global population's increase is causing the water shortage phenomena. It is linked to the ever-growing need to manage the lack of water resources through solutions like water treatment plants to manage and reuse water, desalination plants and purification plants, plants to guarantee existing water reserves and to generate electricity from renewable sources through hydroelectric plants. There is also the need to renew infrastructure that is now obsolete in most parts of the developed world, while also seizing the opportunities that present themselves in emerging countries that are ready to invest in new high quality infrastructure.

2017, in this scenario, was an important year for new orders. The main new projects won by the Group confirm our willingness to work in areas with a favourable profit and risk ratio, but also our will to continue to work in Italy. In fact, in 2017, we also won some important contracts in our country: the Naples-Bari High-Speed Railway section for €238 million, the Palermo-Catania railway section for €186 million and Milan's new ENI headquarters for €171 million, designed to apply for the LEED Gold certification.

The Persian Gulf continues to be a strategic geographical area. During the year, we won several new key projects for the development of the urban areas of some of its main cities. Besides winning an important road connection project in Abu Dhabi (USD200 million), to connect Capital District to the Central Business District, the Group also won three projects for the area's residential and commercial development: the Meydan One Mall (USD435 million), which will be the heart of a massive urban development plan between Meydan and Al Khail Road (United Arab Emirates); the renovation project for the famous Al Faisaliah Mall commercial centre, which is worth €172 million, and also Riyadh's SANG Villas urbanisation project (USD1.3 billion). This integrated project is particularly challenging. It consists of the construction of a city with approximately 6,000 villas, in a 7 million square metres area east of Riyadh. It will also include building more than 160 km of main and secondary roads, with their relevant services, a water treatment plant, and various above-ground and underground water reservoirs.

We also managed to strengthen our presence in the area thanks to Fisia Italimpianti, a subsidiary that won two new contracts: the Shoaiba desalination plant worth USD255 million, and Oman's Salalah desalination plant worth USD100 million.

Through Lane, we also won a contract in the Gulf area to expand the Al Maktoum International Airport (USD125 million), with new terminal services, new taxiways, roads and tunnels in Dubai's airport (United Arab Emirates).

2017 was the year in which we strengthened our activity in the United States, through Lane, with which we reached a backlog that touches €3.0 billion, with €2.6 billion of new orders. These include projects in different sectors: roads, Lane's traditional business sector, where the company won a contract for USD336 million for the I-395 Express Lane; also, water treatment projects, like Washington's Northeast Boundary Tunnel, through which we are consolidating Lane's positioning within the large complex infrastructure sector as well.

Our US market outlook calls for ongoing investments through Lane, including through new businesses, like Lane Power and Energy.

The US market's expected demand for infrastructure by 2015 will reach USD4.6 trillion. At the start of the year, the government relaunched an infrastructure investment plan worth USD1.5 trillion. We are certain that we will be able to significantly contribute to this investment plan, for example, with regard to maintenance activities to be carried out on 15,500 high-risk dams, and for the 56,000 bridges that are currently in a poor structural condition.

Commercial results attained globally and our correct financial management showed in our 2017 economic and financial data. Revenue has grown by +5.8%, EBITDA saw an increase compared to 2016 of 1.2%. Our overall order backlog totals €34.4 billion. It shows the Group's continuity and excellent work and how it is continually consolidating its growth.

Our financial stability was acknowledged by the market during 2017: Dagong and Standard & Poor’s Ratings Services awarded the Group a “BB+” rating on our long-term corporate credit. Fitch Ratings also confirmed the Group's market position, promoting it with a “BB+” rating, for its solid business profile, its proficient order backlog, its efficient risk management system, its improved financial profile and for its results that are perfectly aligned with its Business Plan.

All this, though, is not enough. I am confident that we can still improve, by also continuing to invest in our main asset: people. We continually develop our personnel's skills, while also hiring new people. Our team is growing with the best young new talents on the market, to make sure that our know-how is passed on and to strengthen this incredible asset, which we already have.

We build extraordinary projects, and we must do so in the best possible way, both in engineering terms (which already sets us apart in the sector) and in worksite safety terms. This is another important area for growth for the Group, which renewed its commitment during 2017. We launched a new internal training and communication plan called Valyou. The plan aims at creating new Safety Leaders and a new Health&Safety corporate culture at work. We want it to become a key component of our new DNA.

In 2017, to promote work as a culture and the value of people, we prepared an event that will celebrate work and our people in our worksites during this year. This will take place through a photo exhibition at Milan's la Triennale. The exhibition continues our cultural marketing campaign aimed at improving the brand awareness surrounding our company brand and logo. This cultural marketing formula has already proved to be successful in 2017. It promoted our brand in the United States through a series of events dedicated to Maestro Arturo Toscanini at Milan's La Scala, at the Congress Library in Washington DC and at New York’s Guggenheim Museum.

This growth and consolidation path that we are treading continues to be guided by a sustainable development policy and principles, both for how we build our works and for how we interact with our local communities, but also for how our works impact the environment. In all our activities, we aim to support our clients so that they can attain sustainable development goals with regard to energy, water, climate change, sustainable cities and resilient infrastructure.

Our construction activities follow circular economy principles and create shared value. They contribute to safeguarding the environment and to creating socio-economic development for the areas where our works are built. All this, by also respecting cultures and local diversity. Just to mention a few examples, in 2017, 70% of our personnel working in our projects were workers directly hired from local communities. 88% of our goods and services procurement needs were also met locally. We also continued to support the areas where we build our works through social initiatives, with approximately 200 projects worldwide.

During 2017, we received two recognitions attesting our sustainable approach: for Doha's Red Line North project, the Group received the Sustainability Award 2017 from the Qatar Green Building Council, as Best Green Building Contractor. The Anacostia River Tunnel Project in Washington, D.C. (USA) received the Sustainability Initiative of the Year award from the International Tunneling and Underground Space Association.

But our people are even more important than our dams, bridges, roads and airports, as they build Salini Impregilo's story every day. And a story is not merely a tale of how things must be done, but one that speaks: imagination becoming a building, projects that become real, values that build value. But also, the capacity to transform the once unimaginable into something real. We give life to extraordinary things, every day. We ambitiously wish to look at the new year with the desire to keep improving: reaching new outstanding targets and exceeding the ones we set ourselves. And we intend to do so starting from where we are now, celebrating our work and making the most of our strengths: our skills and our people.

Pietro Salini

¹ Source: Global Economic Prospect, The World Bank Group, January 2018

Our results show the Group's continuity and excellent work and how it is continually consolidating its growth.

The main factors driving the growth in adjusted revenue are some large projects and, specifically, Lane’s ongoing projects, the Rogun dam in Tajikistan, the Forrestfield Airport Link metro in Australia as well as the Meydan One Mall project in Dubai, United Arab Emirates.

Strong order intake

2017 was an important year for new orders with an underlying performance including variations of approximately € 6.7 billion.

2017 main new orders

USA
€ 2.5 bn

Northeast Boundary Tunnel
I-395 Express Lanes project
Three Rivers Protection
Florida Tumpike project
Unionport Bridge
I 70 Reconstruction

Italy
€ 0.7 bn

Eni's Headquarters in Milan
Napoli - Bari HSR
Bicocca - Catenanuova railway

Middle East
€ 2.1 bn

AlMaktoum Airport Expansion
Meydan One Mall in Dubay
Al Faisaliah Redevelopment Project
Shoaiba Desalination Plant
Housing and urban planning

The main new projects won by the Group confirm our willingness to work in areas with a favourable profit and risk ratio, but also our will to continue to work in Italy.
 

Our commitment and Shared Value

Interactive data

Today, Salini Impregilo is present worldwide in 50 countries. We grow everywhere and wish to do so continuously, along a path that we have traced by reaching both commercial and financial targets.

A business strategy that sees us focusing on markets with a more favourable risk-profit ratio

Geographical revenue distribution

 

Our new orders confirm our growth trend

Particularly significant is Lane’s commercial activity, with a backlog that touches €3.0 billion, with €2.6 billion of new orders

2% Latam

3% Asia & Australia

4% Africa

5% Europe

12% Italy

34% Middle East

40% North America

 

Focus on the US market

“Salini Impregilo is ready to seize upon the opportunities offered by this market in which we are already a player as an American company”

The United States is today one of the most promising markets in terms of demand for big infrastructure with a need for investment estimated at being more than $5.1 trillion by 2040.

Infrastructure needs 2016-2025 in USA

 

(*) Source: American Society Of Civil Engineers 2017 Infrastructure report Card and Failure to Act series, published 2011-2017

Trump infrastructure plan: Pietro Salini "Ready to seize the opportunity as a U.S. company in a market with great growth potential"