Dominion´s Evolution in 2019

Letter from the Chairman and CEO

ANTÓN PRADERA

Chairman

MIKEL BARANDIARAN

Chief Executive Officer

We should be proud of 2019, the year that marked Dominion’s twentieth anniversary and saw our business model in full swing; a technological project which is constantly being adapted and reinvented following steadfast discipline, flexibility and sustainability principles. The figures speak for themselves.

2019 at a glance

Key financial figures
(1)Adjusted turnover = Annual Accounts Turnover without revenues from sold devices
(2)EBITA: EBITA: Net Operating Income + PPA’s
(3)Net Income from Continuing Operations (recurrent), excluded discontinued operations
(4)Free Operating Cash Flow: EBITDA –difference between CAPEX and Amortization –NWC variation –Net Financial Income –Tax payment; (acquisitions excluded)
Other relevant figures
(1) End of the year data.
(2) Includes only contracts from the “Solutions” segment
(3) Adjusted turnover = Annual Accounts Turnover without revenues from sold devices
Sales distribution by segment
(1) Contribution Margin: EBITDA before corporate structure and central administration costs
Sales distribution by geography and activity field
(1) 2018 data
(1)The consolidation perimeter in 2019 adds 11 months of results of ByggingIndia and 10 months of Alterna
(2)Adjusted turnover = Annual Accounts Turnover without revenues from sold devices
(3)EBITDA: Net Operating Income + Depreciation; EBITA: Net Operating Income + PPA’s amortization;  EBIT: Net Operating Income
(1)Adjusted turnover = Annual Accounts Turnover without revenues from sold devices
(1) Adjusted turnover = Annual Accounts Turnover without revenues from sold devices
(1) EBITA: EBITA: Net Operating Income + PPA’s
(2) Adjusted turnover = Annual Accounts Turnover without revenues from sold devices
(3) Pro-Forma earnings to comply with IFRS 15 (according to CCAACC 2017)
(4) Net Income from Continuing Operations (recurrent), excluded discontinued operations
(1) 2015-2018 commitment: >60% of EBITDA. → 2018-2022 Commitment: >75% of EBITA

(2) Free Operating Cash Flow: EBITDA – difference between CAPEX and Amortization – NWC variation – Net Financial Income – Tax payment; (acquisitions excluded)
(3) RONA: EBITA / (Total non-current assets – Deferred assets – Goodwill not associated to cash + PPAs amortization current year +Net WC ; excluded acquisitions of the year).
(1) Net Financial Debt: debt with Banks and other financial institutions –cash and equivalents

For further details regarding this and other financial information, please refer to:

Strategy and implementation

Impeccable performance record, once more confirmed by the 2019 results

  • The objectives for 2019 which were set out in the 2019-2022 Strategy Plan were surpassed.
  • The high growth and profitability levels continue.
  • Financial discipline is upheld, with high cash conversion rates.
Businesses

We have made significant progress in implementing our strategic projects

  • 360º Solutions: growth in Asia – Energy x2 since 2017 – Established itself as a benchmark in Digital Transformation.
  • B2B services: establishing itself as a Tier 1 supplier in the industry – Effective transition to electricity distribution networks (Energy).
  • B2C services: Swift and profitable growth of the Smart House project – reaching 150k customers.
  • M&A: takeover of Bygging (industrial services and solutions, India) and Flip (energy trader).
Outlook for 2020

The goals set out in the Strategic Plan are reaffirmed

  • High visibility so as to continue meeting our goals set out for 2020.
  • First dividend distribution in 2020.

Strategy

We shape our future by working ambitiously and tenaciously in the present moment. We have climbed the first rung, but our intention is to continue generating value by climbing to the top of the ladder. This is not just a goal but rather our new Plan.

Disruption defines our context

Disruption is a challenge and could be scary, but it is irreversible and is reaching all sectors.
3 technologies

“3 accelerators are driving the transformation”

Demographic changes

“Millennials will be the majority in 2025”

Geostrategic changes

“Asia is taking center stage”

We are experiencing a revolution in business mode

We stick firmly to the essence of our business model

THIS IS DOMINION

We have a unique management model that is continuously evolving
DIGITALIZATION

“More and better platforms to undertake our internal processes and those of our clients”

DIVERSIFICATION

“New markets and leverage on existing ones to ensure profitable growth”

DECENTRALIZATION

“A new organisational structure that offsets the handicaps of the model, creating shared units and cross-selling mechanisms”

FINANCIAL DISCIPLINE

“New objectives, maintaining our discipline and control parameters for risks”

Our vision and focus for the next four years

The company we
want to be in 2022

“We are going to double our net income…

…consolidating ourselves as a great platform of BRBRC services, backed by a Solutions area

…under the common denominator of digitalization and financial discipline.

In 2019-2022 we will deploy all the potential of Dominion

DIFFERENTIAL VALUE PROPOSITIONS

  • B2C services: Smart House
  • B2B services: Tier 1 proposition
  • Solutions: 360º Vision

POSITIONING

  • Optimize our position in the value chain

DIVERSIFICATION

  • Geografical
  • Sectorial

DIGITALIZATION

  • In-depth use of digital tools

ORGANIZATION

  • Adapt and evolve the organization

Guidance committed to the creation of value

Guidance 2019 - 2022

  • Commitment based on organic growth: M&A as an accelerator.
  • Distribution of 1/3 of net income as a DIVIDEND
  • Lean central structure: =3% on sales (<50% of growth in sales).
  • Control of CAPEX and WC: Capex = amortization. /WC stable.
  • NFD / EBITDA <2x

ESG and Dominion: A Source of Competitiveness

Dominion has developed a specific strategy for the ESG sector to fulfil its commitment to:

Sustainable development, responsible for the environment, people and communities where the company operates, governed by ethics and integrity.

To compare the data with that of the previous financial year, refer to the Non-Financial Information Statement

NFIS information

Corporate Governance

Our governing bodies strive to generate value for our stakeholders. Find out about their composition and how they do this.

Financial year 2019

Business performance

Shares

Our professionals

Our customers

A sustainable supply chain

Business performance

A comprehensive perspective and greater diversification

GEOGRAPHICAL EXPANSION

Expansión hacia Asia de Industrial activity expansion to Asia
  • Takeover of Bygging India in February 2019. Industrial activity sector. High allocation of new projects. High allocation of new projects
  • Projects in Asia/Oceania
  • Strong performance in Australia and the Middle East

SECTORAL DIVERSIFICATION

Energy Growth (x2 since 2017)
  • The importance of the Energy sector has multiplied in the last 2 years.
  • Renewable projects in LATAM
    • 67 MW solar plant completed in the Dominican Republic, O&M contract underway.
    • Began work on a 65 MW wind farm in Mexico. The first project using this technology.
  • High voltage line in Angola: under construction, as planned

DIGITAL TRANSFORMATION

Benchmark partner de for industrial companies
  • Industry Projects 4.0 – Variety of projects using a wide range of technologies
    • Maintenance efficiency maximised using “Big Data.
    • Production process improved by means of Deep Learning in the steel sector.
    • Multi-country asset monitoring for equipment manufacturers.
Tier 1 supplier standing

STANDING

Strengthening its position as a Tier 1 supplier in the industry
  • OneStop Shop contracts, consisting of different types of services
    • Mechanical and electrical maintenance, sheet-metal work, logistics and industrial cleaning under the same contract for a tyre manufacturer in Spain.
  • Contracts with a “Managed services” scheme
    • A comprehensive multi-service contract for a company in the chemical sector in Spain.

DIVERSIFICATION

Effective transition to electricity distribution networks
  • First 2 O&M contracts for electricity distribution grids in LATAM (approx. 20 M€/year):
    • 3 year contract in Chile
    • 3 year contract in Peru
  • Now opportunities in LATAM and other regions with existing customers.
From retailer to household services integrator

Retailer

(Pre 2017)

BUSINESS MODEL

  • Activity: sale of 3rd party products
  • Customer property: 3rd parties
  • Income: as per capture (one off)

COURSE OF ACTION 2019

  • Diversifying products to increase traffic across all channels

Smart House

(Post 2018)

BUSINESS MODEL

  • Activity: comprehensive service provision
  • Customer property: Dominion
  • Income: per operation (recurring)

COURSE OF ACTION 2019

  • Energy trading company takeover.
  • Cash-back company takeover.
  • The launching of our own telecom services.

Shares

Stock market evolution

The evolution of Dominion’s share prices in 2019 was not accompanied by strong operating profits: shares fell by 16.5% in 2019, with the year closing at 3.65 euros/share, while the company’s net earnings per share (EPS) increased by 20% compared to 2018.

Over the first part of the year, the share fell in line with the rest of the market, but the Ibex 35 index eventually resumed growth, increasing by 11.7% at the end of the year.

Different factors have been identified that could explain why Dominion shares did not pick up again in the second half of the year and underwent a considerable imbalance between the stability of the company’s principles and the evolution of the shares. Domestically, some funds with a major stake in Dominion experienced rebates in 2019 that could have lead to forced sales in order to maintain their portfolio balances. Also, in view of how unstable the markets were, the small Spanish caps generally lost appeal amidst international funds. Finally, the increasing automated trading in the stock market could be another limiting factor, as Dominion’s activity is difficult to classify within any single sector group and calls for detailed analysis on the part of investors and analysts so as to identify the full potential of the business.

Given this negative share price trend, it is clear that the market has yet to consider the new and ambitious Strategy Plan the company presented in May 2019. Nor has it taken account of the full observance and advanced progress made with the implementation of the previous plan. The main goal set out in the new plan is to double net profit by 2022, a process which has already been implemented given the figures for 2019.

By contrast, the general opinion of the analysts who monitor the company is much more optimistic and in line with the company’s real situation. The new Plan has been included in their estimates, which is reflected in a consensus target price in excess of 5 €/share. this translates to a 25% appreciation on the share price at the end of 2019.

Looking ahead to 2020, Dominion Global shares are expected to return to the same growth trend they have experienced since the IPO in 2016.

Our professionals

23

Countries*
*Direct workforce

50

Increase in gender diversity in senior positions

73

Nationalities

22

of the workforce under the age of 30

To compare the data with that of the previous financial year, refer to the Non-Financial Information Statement

NFIS information

Our personnel

Dominion is committed to the health, safety and well-being of its employees, in order to minimise the accident rate, by ensuring compliance with the labour regulations in force on this subject and in each geographical area, the implementation of training plans in line with job and workplace characteristics, fostering preventive culture and ensuring the necessary human and technical means to guarantee preventive planning implementation. The objective is to promote personal health and health monitoring for all employees.

Dominion is committed to the health, safety and well-being of its employees, in order to minimise the accident rate, by ensuring compliance with the labour regulations in force on this subject and in each geographical area, the implementation of training plans in line with job and workplace characteristics, fostering preventive culture and ensuring the necessary human and technical means to guarantee preventive planning implementation. The objective is to promote personal health and health monitoring for all employees.

Our customers

We have extended our one stop shop industrial offer. Over a thousand companies around the world are benefiting from Dominion's comprehensive range of multi-technical services and engineering solutions to improve the efficiency of their production processes.

More and more people are benefiting from the Smart House offer.

To compare the data with that of the previous financial year, refer to the Non-Financial Information Statement

NFIS information

A sustainable supply chain

Dominion extends the Company’s strict environmental and social standards to its main suppliers. To this end, it has developed a Supplier Code of Conduct that its main suppliers must comply with.Código de Conducta de Proveedores

More information

To compare the data with that of the previous financial year, refer to the Non-Financial Information Statement

NFIS information