PATIENCE  AND RESTRUCTURING

To further sector diversification and the partnership policy, key features of the four-year period.

Following the positive results obtained by the ONCE Business Corporation (CEOSA) by applying its 2004-2007 Comprehensive Financial Plan, the ONCE General Council, as the sole shareholder of the Corporation, approved a new Strategic Plan for CEOSA until 2011 (see “Así somos” nº 59). Its CEO, Enrique Servando Sánchez, explains the basic elements of this plan in our magazine, marked by a need for patience in the face of the difficult global economic situation and restructuring towards the sectors with the greatest future.

Question – It does not seem that the current time is the best moment to better the results obtained by the previous CEOSA Plan. Which basic objectives has the Corporation set in its new Strategic Plan?
Enrique Servando Sánchez - The Plan is basically a continuation of that of 2004-2007, in which we proposed the restructuring of activities, especially from a company strategy point of view. Not all of the planned initiatives materialised in this period, since certain market situations delayed some activities. As such, the first objective of the 2008-2011 plan is to complete the restructuring of companies where this is required, particularly Alentis, which is the largest company and that facing the biggest solvency issues working in its market. There is also a significant restructuring effort to complete at Rubia Corporación Alimentaria.
Furthermore, we are seeking to grow the figures in the previous Plan and increase diversification, since –as I always say- we are situated amongst “mature businesses” and we need to access others with greater growth potential and margins.
Behind all of this lies CEOSA’s raison d’être, our two fundamental objectives. Firstly, that the Corporation’s assets must be worth more each year; with the previous Strategic Plan we increased our value by 100 million euros and, with regard to this new Plan, we have set a growth objective of 60 to 70 million euros. However, at the same time, we believe that, if the Corporation has to support the ONCE, it should not only be worth more each year but also grow in terms of assets, something that is fundamental for an institution like this. As such, we have reorientated our property business in this direction, towards capital.
In summary, greater value, investment in assets and progressing with diversification. This will lead to an increased turnover, profits and, above all, margin ratios. Not forgetting two top-priority issues: on the one hand, to continue generating employment for people who are blind or suffer from some other disability (jobs which increasingly require higher levels of training); and, on the other hand, to keep making donations to non-profit making organisations which depend financially on the ONCE, such as the Guide Dog Foundation or the Spanish Sports Federation for the Blind.
Q – Given the current economic crisis, would you class the new CEOSA Plan as realistic, ambitious, austere…?
E.S.S.- We have taken the starting point into account, in other words, how 2007 ended in each of the economic sectors in which we operate. It is clear that other businesses have been affected as a result of the property crisis and the financial problems it has created, which are in the air. It is very hard to know how far the consequences will reach… In these circumstances, we have made a reasonable adjustment in the property area due to the uncertainty of the situation we are facing, since no analyst has clear data on what might happen before 2010.
Furthermore, the other business sectors are also affected, be it to a lesser extent. For example, in the tourism sector, in which our hotel chain Confortel operates, reservations and sales, particularly at holiday hotels rather than city hotels, have been affected. Where travel is concerned, where we have the Viajes 2000 agency, business with private individuals has been affected whilst companies are so far maintaining their budgets. The insurance sector is more affected (where we have Seguronce), because people are taking out fewer policies, particularly for vehicles which are the “star insurance policies”. Where the food sector is concerned, specifically the  meat industry where we have Rubia, we are seeing a curious phenomenon: sales are lower than forecast, but with better margins than expected…
In short, since we cannot accurately forecast how the situation will evolve, we have asked our managers to set a few basic objectives. In other words, that they adjust the Plan in each company to the current situation, with specific measures and continuous analysis which enable them to readjust them where necessary. It can be said that it is a Plan for patience in the fundamental businesses and for restructuring to prepare us for the future.

Future sectors
Q - CEOSA also participates directly or indirectly, with a minority share, in other companies which operate in various sectors. Will it retain its commitment to this type of diversification? If so, what will be the preferred sectors?
E.S – Without any doubt, we will remain committed to diversification. We have forecast an investment of 20 million euros in this Plan, a small figure which can be increased if we see the opportunity to participate in a significant project.
Four years ago we were very clear about which sectors we were moving towards, however, at the current time, although it is always important to have a reference, the interesting sectors are changing in the relative short term, their suitability being reviewed every two years. At the present time, we are basically looking at a potential investment in energy, in technology, in the environment and in distribution. In these sectors there are three essential conditions that we request for new investments: that we can do it in amounts which are in line with our volume of opportunities; that they are businesses with a high growth potential; and that they have a greater average margin in the evolution of their sector than the average that we have in our current spheres of activity.
Q – At the present time, what is more important for CEOSA, furthering its partnership policy or developing new business alone?
E.S – Clearly furthering its partnerships. This was already an objective of the 2004-2007 Plan, which has crystallised less than we would have liked, but the fact is, if we are restructuring businesses which are going to be better the day after tomorrow, it is better not to sell a share now but to wait until they are worth more… Furthermore, from the investor’s point of view, if you are restructuring, you are less attractive. That is, in my opinion, the reason why we have not grown more and why, nevertheless, we have greater expectations of doing so in the future. In any case, it is clear to me that we should not do any more business alone.
Q – A short while ago, the Chinese newspaper “The Economic Observer”, in an extensive report on the Spanish economy, included CEOSA amongst the big Spanish companies, especially in the property sector. Does this correspond with any specific interest in possible partnerships with Chinese companies or other European companies with a name in the Far East? Is there any specific sector that appeals?
E.S.S – The Chinese newspaper’s interest is perhaps more institutional than commercial. It no doubt captures their attention that an organisation like ours has a presence and has diversified in various sectors. However, in general, we are too focussed on carrying out many sizeable strategic tasks in Spain to get distracted abroad. This does not mean that we do not study the occasional interesting opportunity related to a specific business.
The experience of Spanish companies which have done business in China has not been very prosperous, except in very special cases, because the conditions for setting up joint Chinese-Spanish companies are very tough; there have been cases, which I know well, of having to pull out because the Chinese party tends to demand having a majority and to perform the management function, with the added problem of communication, and the reporting of this activity… It is currently of greater interest to us to sell things to China, and this includes our participation in the meat sector.
José-Miguel Vila

Consolidated figures 2007 2008 2009 2010 2011
Net turnover 635,128 598,070 639,398 717,158 843,145
Pre-tax profit 56,722 4065 14,450 18,953 36,570

* Forecast produced from the estimated figures for each of the CEOSA companies.