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LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS 08
LETTER FROM THE CHAIRMAN
OF THE BOARD OF DIRECTORS
Ladies and gentlemen, will have to be broad and diverse. It
shareholders: is especially critical to ensure that the
system’s liquidity mechanism continues
In spite of the difficult circumstances in to function and to prevent the inevitable
which we find ourselves, it is yet again my economic slowdown from turning into a
pleasure to inform you of the development of widespread credit and solvency crisis that
Alba and its investee companies in the past could take us back to the worst moments of
year and in the first months of 2020. the financial crisis, and which would lead
to a significant increase in the number of
Let me begin by referring to the serious business failures and could jeopardise the
crisis we are currently immersed in. The solvency of the financial system. We trust
global covid-19 pandemic has forced that the experience of the financial crisis
unprecedented measures – such as home and the consensus on the seriousness of
confinement of entire countries – given the situation will enable such coordinated
the serious risk to the population and to action to take place effectively. However,
the proper functioning of health systems. we fear that, in any case, the economic
The economic impact is absolutely impact will be very relevant.
unpredictable, but we understand that
the consequences will be very significant. As a result, the markets have suffered
Although we hope that the most serious sharp declines and huge volatility, with
phase of the health emergency caused daily changes in many indices never seen
by covid-19 can be overcome in a few before. Thus, in the first quarter of 2020,
weeks or months, the economic slowdown and just to give a few examples, the Ibex
it has generated may lead to a long-term 35 plummeted by 28.9%, the Eurostoxx
recession, abruptly marking the end of the 50 by 25.6% and S&P 500 by 20.0%.
economic growth cycle that began a few
years ago. The share price of Alba fell by 28.4% to
34.75 euros per share, while the NAV
Coordinated action by the various Countries per share at 31 March 2020 was 63.38
and Central Banks is needed to support, as euros per share, marking 16.1% less than
far as possible, businesses, self-employed at the end of 2019.
workers and households, with policies
appropriate to the current situation, which
10
CORPORACIÓN FINANCIERA ALBA ANNUAL REPORT 2019
In any event, we believe that, at this of 2018, the main focus of uncertainty
time, we should focus on the strengths during the year was constituted by the trade
and weaknesses of the businesses of our tensions between the United States, on
investee companies and disregard their the one hand, and China and Europe, on
short-term performance on the stock market. the other. However, these tensions did not
Although logically the impact on our investee seem to have a significant impact on global
companies, both listed and unlisted, is growth.
potentially very uneven, we are confident in
the capacity of their staff teams to overcome From a more general point of view,
this crisis. As a relevant shareholder of these perhaps the most relevant aspect of 2019
Companies, from Alba we will do our best was the realization that the normalization of
to support them in these difficult times. expansive monetary policies in the United
States, Europe and Japan was still far from
Although, at this time, the covid-19 materializing, with interest rates expected
crisis clearly overshadows any other to remain low for at least several more
consideration, we will now briefly review years. Although this extension of expansive
the macroeconomic situation and market monetary conditions was greeted very
developments during 2019 and then review positively by the markets, it is necessary to
Alba’s results and main operations during remember that, in the end, the dependence
that year. Logically, the current situation on these policies has only highlighted the
makes comments regarding the future subject fragility of economic growth. Following a
to a large dose of uncertainty. similar logic, in the last months of 2019,
especially in the European Union, voices
Beginning with a brief review of the global were heard saying that monetary policy
macroeconomic situation, it should be noted had reached its limit to revitalise economic
that the world’s major economies maintained growth, and demanding expansive fiscal
their growth path in 2019, though at a policies with that objective. The situation
slightly lower rate than in previous years, has changed dramatically with the covid-19
in a generalised environment of low crisis, which makes it necessary to take
inflation rates. exceptional measures at all levels.
Apart from some signs of a slowdown that Additionally, other events occurred in 2019
were already detected in the second half that were more local or regional in nature,
11
LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS
LETTER FROM THE CHAIRMAN
OF THE BOARD OF DIRECTORS
which contributed to raising the perception economy was already starting to show
of increased economic risk. Among these, signs of slowdown at the end of 2019
we can highlight the geopolitical tensions and, before the covid-19 crisis, the
in the Persian Gulf in general and in Iran prospects for the coming years suggested
in particular, the “yellow vest” protests in a mitigation of economic growth. Thus, for
France, or the social and economic tensions 2020 and 2021, the market consensus in
in several Latin American countries such as mid-February pointed to an increase in real
Chile, Argentina or Venezuela. GDP of 1.6% in both years which, though
being clearly lower than in previous years,
Finally, more than three years since the once again exceeded the growth expected
referendum and after constant ups and in the large economies of the Eurozone.
downs throughout 2019, the United In the current situation, a generalised
Kingdom’s exit from the European Union economic recession cannot be ruled out,
became official in early 2020. Although it at least during 2020, with the risk that
does not seem to have been the focus of the standstill in economic activity could be
global markets for some time, let alone at extended over time.
the present moment, the truth is that, in our
opinion, the uncertainty of Brexit has not All the key economic variables discussed
completely disappeared, as the framework in previous Annual Reports continued to
of future relations between the two parties improve in Spain in 2019, thanks to the
is still not defined and will certainly be a growth of the economy, but clearly at
source of friction in the coming years. a lower rate and without any measures
having been taken to resolve some
As for Spain, the economy grew again in fundamental imbalances that, in our
2019, with an increase in real GDP of opinion, continue to be a cause for concern
1.8% which, although lower than in previous in the medium term, especially in the
years and lower than expected at the expected situation of moderate recession
beginning of the year, has continued to be in the short term.
the highest among the main countries in the
European Union. The most obvious example of this problem
is the situation of the public pension system,
However, after an uninterrupted quarterly the sustainability of which is more than
growth since late 2013, the Spanish questionable due to the ageing of the
12
CORPORACIÓN FINANCIERA ALBA ANNUAL REPORT 2019population, but for the solution of which million), which allowed the unemployment
no substantial corrective measures have rate to fall to 14.1% by the end of the year,
been proposed in recent years, nor does compared with 15.3% in December 2018.
there seem to be political consensus to The employed population was already
open up a thorough reflection on possible close to the record reached before the crisis
alternatives. began, but the number of unemployed and
the unemployment rate, which had fallen
If we begin a more detailed review of to almost half of the maximum reached in
these variables with the labour market, 2013, still remained far from the pre-crisis
this continued to improve in 2019 but levels.
at a slower pace than in previous years.
According to the Labour Force Survey, In any case, it should be noted that
drawn up by the Spanish Statistics Institute, the improvement in these variables in
in 2019 the number of unemployed fell by 2019 was the smallest over the last 6
231,300 (-6.6% in the year, to 3.2 million years and that the traditional issues of
unemployed) and the number of employed high youth unemployment, gender gap
increased by 451,600 (+2.3%, to 19.8 in unemployment, high proportion of
13
LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORSLETTER FROM THE CHAIRMAN
OF THE BOARD OF DIRECTORS
temporary contracts in new hiring and low Another variable that seemed to have
wages have not been resolved. In fact, it exhausted its potential for improvement was
seems that some of these problems – for the public deficit, which ended 2019 at
example, the first two – have worsened levels close to 2.7% of GDP, higher than the
in relative terms in recent years: while it is forecasts made at the beginning of that year,
true that absolute unemployment rates have and which was 2.5% in 2018. This public
fallen for both genders in almost all age deficit also explained the gradual increase
groups, in some groups they are worsening in public debt which rose by 1.3% in 2019
in relative terms, compared to the national to nearly 1.2 trillion euros. This increase
average. was lower than in previous years and lower
than GDP growth, so that the public debt-to-
For all these reasons, we continue to GDP ratio fell slightly again in the year, to
advocate, for yet another year, the need to nearly 95% by the end of the year, not far
adopt measures to make the labour market from the historical peak of 101% reached at
more flexible and in which the potential for the end of 2014.
improvement of the current system seems
limited if no further reforms are carried Prior to the covid-19 crisis we were sceptical
out. In this sense, some of the measures about the possibility of reducing public
proposed by the new government could deficit in the coming years, given the growth
be counterproductive, by reintroducing slowdown scenario and the economic
some rigidities in the system that were policy targets of the new government. At the
already overcome in previous reforms and present time, when the economic effects of
that ultimately harm both companies and the covid-19 cannot yet be quantified, the
workers. only thing we can be sure of is that we are
going to witness unprecedented increases
At present, a very significant rise in in public spending and public debt – in
unemployment in Spain is expected due Spain and in most countries – the long-
to the economic stoppage caused by the term consequences of which are absolutely
covid-19 – especially if it affects the tourist impossible to predict.
season – but the real long-term impact will
depend on the depth and length of the With regard to the stock markets, 2019
recession. was a very positive year in the major
global stock indices, in strong contrast to
14
CORPORACIÓN FINANCIERA ALBA ANNUAL REPORT 2019the previous year. While the main markets monetary policies that explains this good
ended 2018 in the negative and with performance in 2019, as the very low
relatively high volatilities, last year presented interest rates – even negative in some cases
a diametrically opposed result, with rises – were driving stock valuations, despite
in all the indices and a significant fall in the fact that the prospects for the evolution
volatilities. of corporate results had not improved
substantially during the year. The best
By country, we can highlight the strong example of the enormous influence of these
increase in the Chinese market (+38.0% of policies on the markets is the relatively small
the China 300 index) and North American impact of relevant uncertainties such as the
markets (e.g., +28.9% of the S&P 500) trade “war” between the United States and
– which achieved historical records by China, or the renewed tension in the Persian
the end of the year – but most importantly, Gulf, which generated falls and increases in
increases were significant and largely volatility at certain points in the year, but did
generalised with the vast majority of not prevent the aforementioned generalised
global indices exceeding 20.0% in the rises. This influence can also be seen in the
year. Only the Spanish Ibex 35 and the strong correlation between the main stock
British FTSE 100 showed a more moderate market indices in recent years, the valuation
performance, with annual increases close to increases in almost all types of assets and
12.0% in both cases, due to the high weight the complacency that could be perceived on
of telecommunications operators and banks the markets at the end of last year.
in the former case and the chaotic Brexit
process in the latter. This good market atmosphere at the end
of 2019 continued in the first weeks of
In last year’s Annual Report, we indicated 2020, with new historical highs in several
that, in our opinion, the stock market was markets, but has been violently interrupted
showing signs of a slowdown after a very since mid-February by the crisis caused by
long upward cycle, due to the modest the expansion of the covid-19, first in China,
evolution expected at that time of business and then in many countries around the
results and the incipient normalization of world.
monetary policy in Europe and the United
States. In our opinion, it is precisely the In the current environment of potential
extension of the aforementioned expansive economic recession and collapse of business
15
LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORSLETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS results in some sectors, we must reiterate, If we now focus on the performance of Alba once again, our philosophy to act prudently In 2019, the Net Asset Value (NAV) rose by with regard to future market developments, 12.4% in the year to 4,397.3 million euros maintaining, in the case of Alba, a long-term at the end of the year. NAV per share grew vision, with low debt levels, an appropriate by the same rate, ending the year at 75.50 balance between profitability and risk and by euros per share. giving priority to those companies with solid balance sheets and management models. Likewise, Alba’s share price increased by The key to investment in the equity markets 14.2% in 2019, to reach 48.55 euros in the medium and long term ultimately lies per share at the end of the financial year. in the development of profits and cash flow The evolution of Alba’s share price was of companies and we believe that good better than the performance of the Ibex 35 investment opportunities could be found (+11.8%) and the Eurostoxx 50 (+24.8%) even in the current context, still taking a in that same period. long-term view. 16 CORPORACIÓN FINANCIERA ALBA ANNUAL REPORT 2019
With regard to Alba’s results, in 2019 it • 57.7 million euros in the purchase
5
obtained consolidated profits after tax of of a 7.48% indirect share of Verisure,
179.2 million euros, 16.1% higher than which also operates under the brand
the net profit of 154.4 million euros in “Securitas Direct” and has over three
the previous year, thanks to the reversal of million monitored alarm customers in fifteen
provisions for impairments made in previous countries in Europe and Latin America.
years in the book value of various investees In July, Alba sold a 17.91% share of the
and of other financial assets and the capital holding company of its whole indirect
gains obtained on the sale of the stake shareholding in Verisure for 100 million
in Mecalux, which offset the lower profits euros to a group of investors, without
contributed by some of our investees. the sale generating any financial result
for Alba. Therefore, as at 31 December
Per share, Alba achieved a profit of 3.08 2019, Alba’s indirect stake in Verisure,
euros in the year, compared with 2.65 in economic rights and net of minority
euros in 2018. interests, amounted to 6.14% of its share
capital.
In this report, you can find a more detailed
analysis of the various items that make • 3.4 million euros in the acquisition,
1
up Alba’s Profit and Loss Statement and during the first quarter, of an additional
the Balance Sheet, as well as information 1.58% of Parques Reunidos. In early
about the performance of our investee September, the takeover bid on the
companies in the 2019 financial year. Company was successfully concluded
by an EQT-controlled vehicle. Alba did
In 2019, Alba made significant not sell its shares in the takeover, but did
investments, primarily in the incorporation contribute its shares in Parques Reunidos to
of new investee companies to its portfolio. the bidding vehicle. Upon completion of
Thus, Alba’s total investments reached the mentioned takeover, Parque Reunidos
645.7 million euros in the financial year, shares were excluded from listing on 5
an amount similar to that of 2018: December. Alba remains an important
shareholder in Parques Reunidos over
the long term, with an indirect stake of
24.98%.
17
LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORSLETTER FROM THE CHAIRMAN
OF THE BOARD OF DIRECTORS
• .4 million euros in the purchase of
1 of 26.8 million euros – of which 24.4
an extra 0.05% of CIE Automotive, million were recorded in 2019 – and
increasing the stake in this Company to received dividends of 15.8 million euros.
10.15% at the end of 2019.
• nd the sale of two properties in Madrid,
A
• F inally, through Deyá Capital, 73.3 for a total of 12.0 million euros.
million euros were invested in the
purchase of indirect shares in 9.46% of As a result of these asset purchases and
Grupo Alvic (a leading company in the sales, Alba’s net cash – excluding the
manufacture of panels and components impact of the global consolidation of
for kitchen furniture), 37.43% of Nuadi Satlink, Nuadi and Preving – dropped by
(the largest independent European 76.7% in 2019, reaching 62.9 million
manufacturer of vehicle braking system euros at the end of the year. In any case,
components), 24.81% of Preving Alba continues to enjoy significant financial
(occupational risk prevention) and, lastly, capacity to accommodate new investments
3.27% of Telepizza (as part of the KKR- and, true to its philosophy, continues to
led takeover bid led of this Company, analyse new investment opportunities in
whose shares were delisted in July). listed and unlisted companies in both Spain
and beyond, preserving its philosophy
On the other hand, in 2019, sales were based on prudence and long-term vision.
made for a total amount of 235.3 million
euros, among which, apart from the Among the transactions announced or
already mentioned divestment in Verisure, it completed after year-end and up to
is worth mentioning: 30 March 2020, there was the sale
of two buildings in Barcelona for 17.0
• T he sale of its 24.38% stake in million euros and the investment made
Mecalux for 121.9 million euros. to strengthen our shareholding in CIE
Alba’s shareholdings comprised 8.78% Automotive that should be noted.
direct and 15.60% indirect stakes,
through Deyá Capital. In total, since To conclude with the most relevant changes
the beginning of the investment in July in the composition of our portfolio, due to
2010, Alba obtained a total capital gain their relevance it is necessary to note that,
18
CORPORACIÓN FINANCIERA ALBA ANNUAL REPORT 2019in mid-November, the Swiss stock exchange Committee already contained in the
operator, SIX, announced its intention to Regulations of the Board of Directors.
launch a voluntary takeover bid for all the
shares of Bolsas y Mercados Españoles at a Furthermore, in terms of internal policies,
price of 34.00 euros per share, adjustable we have to mention first that, as proposed
for the dividends distributed from then on. by the Appointments and Remuneration
After receiving all necessary approvals, Committee, a new Remuneration Policy
the acceptance period for the takeover bid was approved for the Board of Directors,
commenced on 30 March, and it will run which primarily collects the applicable
until 11 May unless a competing bid arises. principles as provided under the Law, sets
At this point, we would like to recall that maximum limits to the different types of
Alba’s stake in Bolsas y Mercados Españoles remuneration, regulates the welfare system
had a market value of 346.7 million euros as for the Executive Directors, and regulates
at 31 December 2019. – in a more detailed manner than in the
previous Policy – the clawback clause,
With regard to the rules and practices of extending the claim term and the cases in
good corporate governance, Alba has which it is applicable. Likewise, the policies
continued its efforts to incorporate into its for candidate selection for Director, Risk
internal regulations and practices both the Management, Corporate Governance and
new rules that have been introduced and Corporate Social Responsibility have been
the recommendations on good corporate updated by approving new versions.
governance.
With regards to the composition of
With regard to internal regulations, it the Board, this has undergone some
should be noted that in 2019, following the modifications during the year, such that
recommendations of the CNMV (Spanish at the end of the year it was made up
stock exchange regulator) Technical Guide of twelve members, of which only three
1/2019 of 20 February on Appointments were “executive” and the rest “external”,
and Remuneration Committees, Alba’s three of whom were “proprietary” and six
Regulations for the Appointments and “independent”. This composition of the
Remuneration Committee were approved, Board is considered appropriate to the
thus completing the regulations of this Company’s capital structure and is also
19
LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORSLETTER FROM THE CHAIRMAN
OF THE BOARD OF DIRECTORS
balanced in terms of knowledge, experience but, without prejudice to proper functioning,
and different typology thereof. With regard it has been considered convenient and
to gender diversity in the composition of the more operational that two of the existing
Board, since 2016, the Company had set Committees (Operations and Investment
itself the goal of having the least represented Monitoring) be merged into one that
gender on the Board reach 30% of the assumes the functions of the above-
total number of Board members in 2020, mentioned ones. This new Committee is
and this percentage has been exceeded called the Investment Committee.
in 2019, with 33.33% female Board
members. Also in the 2019 financial year, following
the proposal of the Appointments and
As for the Board’s internal organisation, Remuneration Committee, the Board of
until the year 2018 the Board had Directors approved the competencies of
four Committees (Audit & Compliance, the Board and the succession plan for the
Appointments and Remuneration, Chairman and the chief executive officer.
Operations, and Investment Monitoring)
20
CORPORACIÓN FINANCIERA ALBA ANNUAL REPORT 2019Likewise, in 2019 the Company complied dividend would be complementary to the
with all the applicable recommendations of one of the same amount paid in October
the Code of Good Governance for Listed last year.
Companies, approved by the CNMV in
2015. Specifically, out of a total of 64 Finally, on behalf of the entire Board
recommendations, 56 are applicable, 54 of Directors, I want to thank all of the
of which are fully complied with and only employees of our Company and of
2 partially. all our investee companies for their
professionalism, enthusiasm and dedication,
The following reports and documents were and all of you, our shareholders, for your
also approved: the Annual Corporate trust and support.
Governance Report, the Directors’
Remuneration Report, the Report on Sincerely,
Non-Financial Information, Related Party Carlos March Delgado
Transactions Report and the Board’s
evaluation, as well as other additional
reports issued by the Board’s Committees.
Monitoring reports on Risk Control and
Management, Regulatory Compliance
and Criminal Prevention functions have
also been prepared and submitted to the
relevant bodies.
With regard to the distribution of profit
for the year, the Board of Directors has
proposed to the General Shareholders’
Meeting the distribution of an ordinary
dividend of 1.00 euro gross per share
for 2019, which will entail the payment,
subject to prior approval by the General
Shareholders’ Meeting to be held in mid-
June, of 0.50 euro gross per share. This
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