ACS, Actividades de Construcción y Servicios, S.A.

Good morning, everyone. And thank you very much for joining us in this 2023 results presentation. Our chairman will be joining us later. Until then, I'm going to proceed with the presentation. I'm here with Mr. Ángel García-Altazona, who's Corporate Chief Officer, Mr. Emilio Grande, who's our CFO. And as usual, after the presentation, there will be time for a Q&A in which we will discuss clarify any questions you may have. If you're following this online, you can send in your questions through the usual channel. I'd like to start by mentioning the five most relevant highlights of 2023. First of all, The group has had an outstanding year in operational results. Net operating income increased by 16.6% to 667 million euros, which is on the high end of the range of the guidance we gave for 2023 of 10%. Our income grew by 10.9%, adjusted by And our EBITDA rose 13.5%, also adjusted by Forex, up to 1.9 billion euros. So our EBITDA margin was 5.3%, which was higher than the previous year. And secondly, the group has had very solid cash flow generation with over 2.2 billion euros in gross operating cash flow, which grew 10.9%. Our available cash flow for shareholder remuneration and financial investments was 1.054 billion euro. Thirdly, the strong cash flow generation has enabled us to increase our net cash position by 176 million euros to 400 million on closing of the year. And all of that after having invested 462 million to increase our hoctave stake and to pay out 632 million to ACS shareholders as well as minorities. And fourthly, we've had a very strong growth in contract awards, 20%, if we adjust by the exchange rate, with over 45.1 billion euros. 44% of new awards have taken place in strategic high-growth markets, including the technology sector, energy transition, social infrastructures, including those in the areas of health, education and biotechnology, as well as sustainable mobility projects. We've increased the number of awards in all of our geographies with a total backlog of approximately 78.5 billion euros at closing. And so we are experiencing strong growth and we predict that this is a trend that will continue in the future. Fifthly, we continue to strengthen our risk management policies. For example, we're including the weight of lower-risk contracts, including partnerships, collaborative contracts, open book contracts, and so on, which are currently 85% of our infrastructure backlog, when five years ago it was under 60%. Looking at the main... metrics from 2023, we can see that the group had an excellent performance in all of its main metrics. First of all, turnover rose by 10.9%, adjusted for the exchange rate, up to 35.7 billion euros. Our backlog at the end of the year was of over 73.5 billion euros, that's 9.5% higher than at the end of last year, in constant euros. A bit down in the year, was 1.909 billion euros. That's 13.5% higher than the previous year at current euros. And net profit increased 718 million euros. That's 16.7% or 18.5% in current euros. In the next slide, we will see the breakdown of the different components of this growth. Our gross operating cash flow was 2.24 billion euros. That's 221 million more than the previous year. By December 30th, 2023, the group had 400 million in net cash, which is 176 million better than the previous year, thanks to volume growth as well as to our new capital allocation strategy. But we'll talk about this in more detail later. In the next slide, you can see the group's net profit for the year with the breakdown by activity. net profit was €780 million. That's up 16.7% in a year, thanks to, first of all, construction, which contributed €434 million because of the excellent performance of the businesses and our bigger stake in Harkiv, with a 28.9% increase. year-on-year. On the other hand, our concession business brought in 206 million euros, of which 179 were the Abertis contribution, 36 million more than the previous year, due mostly to the recovery of traffic volumes, which grew 3.4% and increased in tariffs above 7%. Net profit from services was 28 million euros. That's pretty much in line with last year's result. And therefore, the Widespread improved performance of our businesses meant that our net ordinary profit from activities grew to €667 million. That's 16.6% more than the previous year. And our total net profit was €718 million. If we include the impact of one-offs, including the net capital gains of €180 million from the sale to Albertis of our 57% stake in Highway SH288. And so the group's total net profit grew 16.7%. And finally, our BPA was 3 euros per share, which is up 19.7%. That's our earnings per share. On December 31st, the group had a very solid cash position of 400 million. That's 176 million more than last year's closing. Gross operational cash flow was over 2.2 billion euros, of which 1.054 million were free available cash flow for shareholder remuneration strategic investments. Investment to increase our HOPTI of stake was 452 million euros. And shareholder remuneration for... ACS shareholders and minorities by HOCTIV and ACS was €632 million. Moving on now to looking at the results by activities, we're going to start with construction in the next slide. Construction revenues were approximately €33.4 billion, that's up 6.1% or 10.4% in current euros. more, while our EBIT grew 13.4% or 19.6% in current euros, up to 900 million euros. Our net margin showed good stability due to improved margins in HoCTIV America and the contribution of high value-added projects. Our backlog grew 6.9% or 9.9% in current euros and is at approximately 70.6 billion euros at the end of the year. Awards increased considerably thanks to high growth markets like digital and technology, energy transition, BHE or biopharma, health and education and most importantly, Sustainable mobility. On slide number 8, you can see the revenue and backlog data by region. North America revenue, €21.6 billion, up 5.1% or 8.8% if you adjust for the exchange rate. The backlog grew to approximately €38.5 billion, that's 7% more, because of excellent increase in awards to about €25 billion. The strong growth of revenue in Asia Pacific with €8.1 billion, that's 20% more in local currency. The backlog grew 4.3% in local currency to €19.5 billion, driven by €11.7 billion in new awards. Europe's revenues increased 3.1% up to 3.3 billion euros and the backlog 22% driven by over 5.9 billion euros in new awards. In this slide, you can see the breakdown of our construction backlog. Awards were approximately 43.2 billion euros in a year. That's 15.8% or 19% in local currency. And with stronger growth in strategic segments like digital technology, energy transition, health, biopharma or education and sustainable mobility, which now represent almost half of our annual awards. In slide number 10, you can see a list of contracts awarded in our main markets. First of all, energy transition projects. That's a global megatrend, which is still driving strong investment plans by governments, institutions, and large corporates, which would include, first of all, the extension of a battery storage energy system in Australia by Nibin, which is one of the main global promoters of renewable energy, and high-voltage transport, HumeLink West, project in West Australia, as well as factories for manufacturing batteries for EV vehicles in the US, including Panasonic Battery Factory in Kansas, and another one for Honda and LG Energy. in Ohio. Also, the engineering and construction of a lithium hydroxide plant in Australia and a nickel extraction contract in Indonesia. And secondly, projects in the digital and technology sectors, which continue to grow in all of our main markets. Growth of the data center market is driven by the high demand for computational power and AI with awards of approximately 3.5 billion euros. Some examples include 10 projects of data centers in several states in the US, as well as a multi-physical data center in the Philippines. And thirdly, infrastructure in the area of sustainable mobility and smart cities which is also a long-term structural growth market. In this area, the group has received several awards for contracts including a network of fast charging for electric vehicles in Germany, the light train in the Green Line in Calgary in Canada, and the development of the first set of tunnels for the Suburban Rail Loop East project for the Victorian Government in Australia. In Health, Bioforma and Education we have projects such as the extension of the Westchester Medical Centre in New York, the Research and Development Lab of Labor Castle in Germany, and the Orlando Hospital in Florida, as well as the Greensburg Hospital in Australia. The group is also well positioned in defense because of our reputation and expertise over decades. During this period, we have been awarded several projects in our main regions. including two buildings in the Omaha Air Force Base in Nebraska for the US State Department, Defense Department, and a contract to provide strategic advice, planning, supply management, operations and maintenance for the fuel network of the Australian Defense Force. I should also mention other civil engineering and construction projects which still represent an important part of our business, including the modernization of two existing buildings of UN headquarters in New York, the extension of Highway US 69 in Texas, and the new stadium for the Tennessee Titans for the NFL in Nashville. As for concessions, our EBITDA grew 35% to €304 million, thanks to a greater contribution from Abertis and the complete consolidation of SH288 in Iridium. Net ordinary profit grew 5.7% to €206 million. And that's without including a net capital gains of 180 million euros for their sales at 50% stake in 288 to Abertis. If we included that net profit in the year would have been almost double up to 386 million euros. In the next slide, number 12, you can see in more detail the contribution to our EBITDA and the operating profit of the group of each company. Abertis increased its contribution to the group's EBITDA up to 199 million. It's very excellent performance. It was driven by the 7% tariff hikes, most of them linked to inflation. positive growth in traffic volumes, with average daily traffic growth of 3.4%. For 2024, planned tariff increases, according to the framework agreements applicable, will be of over 4.5%. So net profit, Aberti's contribution was 179 million euros, that's 25% more. And Aberti's paid in May a total of 602 million euros in dividends, of which 297 million were paid to the ACS Group. In Eregium, Business remained stable, constant perimeter. However, the consolidation of 288 increased the EBITDA by 60 million euros to 106 million. Although it had an insignificant impact on net profit, the 288 still continues to perform well with tariffs which went up 14.9% in 2023 and we expect them to increase by 15.2% in 2024 based on growth of Texas gross state product. Continuing with Abertis, last July we signed a new shareholders agreement with Mundis for Abertis global leadership in transport infrastructure concessions. Abertis has an ambitious investment plan to grow its asset portfolio and promote sustainable long-term growth whilst maintaining an optimal capital structure and preserving its credit rating. In 2023, we have witnessed new examples of this strategy. First of all, the acquisition of 56.7% of 288. Transaction price was $1.53 billion, equivalent to 2.7 billion in equity value for 100%. The second transaction was the award of a concession to operate four of the main roads in Puerto Rico for a period of 40 years. The price for the transaction was $2.85 billion. And as agreed beforehand, in February 2024, Aberti's shareholders contributed €1.3 billion to partially finance these transactions and preserve optimal capital structure and strengthen Aberti's credit raising.

In the next slide, number 14, we can see how, apart from Avertis' assets, which the group has, it's also got a backlog of 91 assets worldwide with a book value of over 2 billion. And we've got a whole lot of investment opportunities in different segments and regions, which could entail investing in greenfield infrastructure on a large scale. Iridium has been shortlisted for 10 different projects, above all in transport, which would be a total investment of over 16 billion euros in North America, Europe and Latin America. Right now, we're getting shortlisting processes done for another 38 projects. And we're also investing in growth sectors like digital technology and energy transition. And in 2023, we invested some 150 million euros in that, along with 43 million in traditional PPPs. We've identified a significant pipeline investing in data centres. And the German Transport Ministry has awarded a Hochtief joint venture contractor fund, plan, build and operate a rapid charging grid for electric vehicles with a total investment of 250 million euros, including electricity. CapEx of over 50 million in energy transition. At the end of 2023, the solar power Glenrowan in Australia came online. Pacific has developed and invested category into this solar power station. And over the year, Pacific has also acquired the development rights to the Hopeland plant. solar park for 300 megawatts in Queensland, which is the second solar project we have on such a large scale, which we've achieved recently. In Clesse, the earnings in 2023 show sound operating performance worldwide, and the growth of Edbito was double-digit, reaching 107 million euros worldwide. Our backlog is 2.9 billion euros, equivalent to 18 months of revenues. And amongst recent awards we've got are for military bases and Spanish hospitals from the Ministry of Defence, the ALIF contract for helping disabled travellers in the Spanish train stations. We can now move on to the strategic background to our results here. Basically, in the context of our year-end results, I can take this opportunity to talk about how we're rolling out our strategy, which is made up of four main pillars, promoting the integration of the group's companies' operations and simplifying the group structure, leveraging our global position to capture growth opportunities of investment in infrastructure related to digitalisation, decarbonisation and reshoring. and sustainable mobility civil engineering and building reinforcing our risk management and strengthening our balance sheet applying a disciplined capital assignation strategy to ensure growth and an attractive level of returns for our shareholders in the next slide we see the group as it is right now an integrated platform which is promoting growth in strategic sectors working through companies in three areas first of all what we call acs integrated solutions an expert in integrated engineering solutions and high added value project management in building Digitalisation, technology, power, industry and natural resources. Secondly, we've got ACS engineering, construction, working on civil engineering and building in general. Thirdly, ACS infrastructures, working in transport, education, health, energy, digitalisation, sustainable mobility and greenfield and brownfield projects. And now moving, well you've seen the organisation, now we've had things divided over the three segments, but now we can move on to slide 19 and see the seven strategic initiatives we have focused on improving our risk profile and achieving high growth in strategic markets. I talked about how we're improving the risk profile, focusing our growth on projects whose contractual structures mean that we are sharing risks. reinforcing our engineering capacities organically and through selective purchases in new markets, integrating our global supply chain through our subsidiary, well, Turner's subsidiary, SourceBlue, and managing the supply chain. SourceBlue has a rapidly growing supply chain. purchase volume of 1 billion euros, which has grown very fast over the last two years, giving it a key competitive advantage in new market segments. Developing global relations with our major multinational clients. A good example is how we're working with all the hyperscalable enterprises in North America, Europe and Asia-Pacific. We're promoting greater operating integration of the companies in the group so we can share know-how and achieve greater efficiencies. So we've got a new global platform for innovating the know-how we have in strategic segments that are key to growth. So we're taking the opportunity of not just investing in development of the assets we have, but working hard to invest in future businesses. Continuing from slide 20, you can see here the key underpinnings of the group strategy. working in digitalisation, decarbonisation and re-localisation. And as I said, this is basically the areas we're covering. In the next slide, you can see another key element of our strategy, the efficient assignation of capital in order to support diversification, streamlining and growth, whilst maintaining attractive remuneration for our shareholders. Our investment strategy is grouped into four blocks. First of all, in Abertis, where we're totally committed to working with our partner, Mundis, to foster growth and value creation through the acquisition of new assets. Secondly, working through inorganic growth. First of all, we're still putting capital into the consolidation and and increasing of our technical and engineering know-how. Examples would be the Canadian deal with Novopro and the acquisition of the Skybridge telecommunication services. Also, in infrastructure, we're deploying capital to increase the opportunities we have in traditional markets and growth markets, and also in transport infrastructure, as we've been doing for some years. Fourthly, we've got simplification or streamlining over recent years. We have streamlined the group after the purchase and exclusion of CEMIC, and we're still analysing opportunities there. And now we come to our conclusions. I'd like to give you some key take-home messages today based on our results in the last year. ACS has had sound operating profits with EBITDA and revenues growing double digits in like-for-like terms, and our backlog guarantees we can continue that growth. Our earnings per share has grown 20% to reach €3, which means we are offering a very attractive return to our shareholders. Thirdly, with 16.6% growth in net operating profit from our activities, we've gone way beyond the target established, which was to grow between 5% and 10%. For 2024 now, we're establishing the same target. And finally, I can say that we're making further progress in rolling out our strategy to establish the foundations for our growth in the future years with... stable cash flow, a sound balance sheet, and creating long-term value. Thank you for attending this call, and I hope that we can now answer any questions you might have.

Let's start first with the ones that have come in from online. there's several small minority shareholders who are asking, given the current reaction of the market, whether we're planning any exceptional one-off initiative, or somebody's asking whether we're going to change or modify our treasury stock or share buyback policies, and also with regards to the group's payout policy, whether we're planning any changes, given all this... Excellent news. Well, thank you, Luis. We still believe that our basic... Value per share should be about 50. And we still believe in our strategy firmly. And the reason why we sometimes do share buybacks is twofold. First, of course, because we use part of our dividend income for that. And also when there's opportunities. Given the fundamental valuation of our share and the current trading price, there will probably be an opportunity, which we will analyze over the next few days. And now getting into some of the questions from analysts who were unable to attend in person, I'll ask a couple and then we'll open the floor for those of you who are here. Nicolás Mora has sent us a question about HoCTIV. Are staking HoCTIV has increased in 2023? Are we comfortable with the current stake, 76% or 78.5% if we adjust by the exchange rate? What's the plan for Hoxbiv? Well, in that sense, In our capital allocation policy, apart from strategic investments and so on, there's always a component which has to do with when opportunities develop and what sort of returns we can get. Currently, we're getting a return from our investment in Hoctave of over 14%, so that metric still works, but obviously it's subject to the value or the trading price of the shares in the market. There's quite a few, but I'm just going to ask one more question so that we give people in the room a chance to ask questions directly. But there's another which is asking us if we can give a bit more detail because we've just announced that our target for ordinary net profit is going to be between 10 and 15. Do we have any targets for turnover and EBITDA for 2024 and beyond? Well, clearly, as you've seen in the trends, for the company in our different priority sectors. We've had significant double digit growth in all of our segments and businesses. And so we expect that to continue. However, in terms of our strategy and our growth, there is an important component, which is stabilizing our cash flow. And so we will continue to stabilize that, reducing the company's risks. That's a significant objective. And then there's recurrent profit from our various businesses. But the most important part about the strategy is not so much the numbers, which are the consequence of the strategy but the value of the platform which is the acs group and now we're trying to replicate the strategy followed in the 80s 90s the beginning of the 2000s when there were very strong growth trends for all construction groups in the world because of all that investment in concessions and so global groups including acs and our competitors grew very strongly from that moment, from all that private investment, which came to a standstill in 2008 with the financial crisis and remained more or less constant for about 10 years. Now it's picking up again, not just in every traditional market, We have referred to the projects in which we've been shortlisted and in which we will be shortlisted, but also in all the new markets that we're opening, because as we move between different construction segments, we're able to invest in those sectors and markets. And so our growth platform at ACS and long-term opportunities are almost infinite. I mean, the guidance we're given now is tiny compared to the future potential we see and which we are already beginning to materialize and will continue to realize over the next months and years. Yes, good afternoon. I'm Luis Prieto from Kepler. And I have two questions. The first is there's a significant quantity of assets available for sale in your books. And so I wonder if you could give us more detail about the divestment process for these assets and also how close they are. how that process is going. And my next question is, you've spoken about your M&A strategy and how to grow your business inorganically, and you've spoken about different opportunities, but I wonder how you could grow the Turner business in other geographies through M&A to replicate that low-risk, high-growth model. And perhaps that's the topic for the Investor Day, but if you could tell us something now, I'd be grateful. Well, first of all, as for our asset available for sale portfolio, the non-core assets, we have particularly industrial assets and that process is ongoing and we hope to realize it throughout this year and the next. And there's quite a lot of value to be captured there. And then on the other hand, we have Clefe, which is not booked as an asset available for sale, but we have announced that we have an ongoing sales process, but it's confidential for now and we're still working on it. And then we have the potential amortization of that 44%. We've still hold of the test 688, but the problem or the advantage of the 288 is that it's growing a lot. And so every month that goes by, the value goes up too, because traffic and revenues grow month after month, and tariffs are now going to go up 15%. So really, we want to try and capture as much as possible of that growth so that the asset will be fully mature when we sell it. And that asset would be worth probably, I don't know, I can't really give you a number, but those assets together could add up to almost 3 billion of non-core businesses which we could monetize in the coming years. Another very important point I mentioned before, Luis, I'm sorry, and it's something that hasn't really been picked up on in previous presentations, but excluding Abertis, we have a backlog of over 90 projects valued at equity in our books, not market value, $2 billion. And in addition, we have Abertis. And Abertis, one of the things we told you in the HOCTIV earnings presentation was that we were beginning to renegotiate some of our concessions without additional equity to extend in years and in revenue. And we've confirmed the first one last week, so we have Abertis. significant potential for organic growth in Abertis as well together with the acquisitions we're going to make plus everything else means that Abertis will also grow very significantly driven by the excellent relationship between shareholders as well so In terms of potential, we really expect very significant growth. We don't usually consolidate the EBITDA because we don't like doing that, but if we did consolidate the EBITDA of all those concessions, our EBITDA from infra and other assets would be worth about 50% of that of the group, and that's a variable we don't often talk about. And a question about Turner. Well, Turner is a group which is bringing in almost 18 billion revenues right now in the US. And there's a huge sector in Europe which we're not able to access because we don't have the right platform. And so priority for us is definitely to open Turner in Europe this year. We can do it organically or inorganically. Inorganically, we have three potential opportunities we're analyzing and looking at. And organically, of course. But if you look at the market in Europe and the success in the U.S. and you extrapolate with a 25% success rate for Turner in Europe, that would be very significant growth for our core sector. And opportunities that that would generate. Well, all kinds, from the small, potential smaller companies we could acquire. Do you remember Setsman, two years ago, was an engineering firm, mostly natural resources focused on coal, and that was because of ESG. It was a company that... Well, there weren't any major coal projects, so it didn't have a lot of... backlog and looking at the strategy we realised that given their engineering expertise if we could provide our expertise of markets for other natural resources like lithium, vanadium, nickel, cadmium, rare earths and so on, copper and iron ore we could really expand the potential of that firm enormously and the investments we've made like Nova Pro or Onyx and the one we'll be announcing very soon which is just about to be signed have completely restructured Huffman and now it's gone from having very little revenue and negative profit to 50 million in profit this year and revenue growing hugely And well, we've doubled the EBITDA versus the previous year. And the total investments we've made is actually tiny. So one strategy is to replicate that same kind of approach with very small companies, which might be strategic in order to reinforce Turner's electromechanical capacity in Europe. But there's also some medium-sized opportunities between 400 and 1 billion that we've identified. And then there are bigger opportunities. I'm from Santander and I have two questions. The first about what you were just saying about extending the Abertis concessions. I think I've read in the press that you trust that you will be able to extend the duration of the concessions in France. I wonder if you can give us a bit more color on the rationale for that, because the French government doesn't seem to be very willing to extend concessions. And the second question which maybe again this would be more for the capital markets day but it'd be really useful for us to have some idea of the kind of investment level not the specific acquisitions of course but what kind of level of investment of strategic investment might we be expecting for the next years This year it was about, just in, an octave, 384 million. Is that the kind of number you expect to replicate in the next years or not? Could you tell us a bit about that? Sure. When we talk about concession extensions for Albertis, we're not referring to France. The French government has already said it won't be extending any concessions. What we think will happen in France is that there will be new tenders for those concessions. And we think that we are in a good competitive position to bid in those tenders and be awarded some of those concessions. So the concessions that are being extended are not the ones in France. It's mostly the ones outside Europe, because Europe does not allow extension of concessions, but beyond outside Europe, it is allowed. What's happening globally is that the governments in each country need to invest in construction and they have to invest to drive their economic growth and because they need it. There's a huge gap in the maintenance of traditional infrastructure without even talking about new sectors when they're actually spending. And the best way to do that, as ever, has been to extend concessions, increase tariffs and allow the concession owners to invest. But that is not allowed in the European Union and so in those other countries we are seeing a lot of concession extensions and Rising tariffs and that lengthens the life of the concession and the EBITDAs ex France. And we're working on it as well as investment opportunities. We've already identified several portfolios and several investment opportunities, which we're looking at, of course, well known as the Australian competitive case we're participating in, which is the first one in the short term, but there will be others. Yes, oh, investment levels, Capital Markets Day, definitely. Hello, Juan, I'm Victor from Societe General, and I have a question about the projects that have already been made public and have been in the media in the US, and highways. Could you give us a bit more information? First, there was the one that was awarded in Denver, in Colorado. I think Abertis was bidding with DEAF, I think. And I wonder if you could tell us what kind of multiple or what kind of transaction is that, as far as the bid that you've presented, which you haven't been awarded the contract. Actually, I'll ask you my second question about the one with Meridian for the 400 in May. I suppose this might be confidential, but what kind of project is that SR as far as the size? And then there's this sling thing, which you've just mentioned, is going to be short-term. So what's the timing for that announcement? The Australia one in which you're bidding is sling? Okay. Okay. Well, Colorado, it's true that we participated in that tender, but that's a very long-term concession. It doesn't generate any big dollar cash flows until a long time from now. It's like 80 years, I think. So ultimately, if you take into account the highway... With Apertiz's business plan, we don't have any problems with receiving dividends after 2040, because by then we'll have the 288 and Puerto Rico and a lot of the green fields that we've contributed. But what we're interested in doing now is in reinforcing everything between 2031 and 2040, and we couldn't get that from Colorado. and so in terms of metrics it was dilutive and that's why we didn't really bid very competitively in that tender. SR400, that's one of the several managed lanes projects that are being put up for tender in Australia and with our experience in the US and with our experience in tall roads and managed lanes in the US, we're very interested in that kind of project. I'll remind you that 288 The equity invested 100% at that time was approximately $340 million. And right now we've sold it 100% for $2.7 billion. And we bought the remaining percentage in 2000 above our 21%. So the multiplier for the $340 to the $2.7 and the $2.7 with the increased in traffic volumes are already obsolete. Because growth in this type of projects is huge and we have a very good position and there are many projects that are to come. Greenfield projects in the US of this type. No, this one's even bigger because Georgia, this is the first project, but there's three other projects that are going to be attended in Georgia. And this first one is significantly bigger than the 388. And what is your stake in that consortium? Equity, it's about 33%, I think, and construction, 50%. And the East Link process is ongoing, it's confidential, there's not much I can say in that case.