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

Hello, everyone, and thank you for joining us for the ATS Group 2024 First Half Results Call. This is Javier Crespo, Head of Investor Relations. The call will be led by our CEO, Juan Santamaria, who is accompanied by our Corporate General Manager, Anja García-Altozano, the Group's Chief Financial Officer, Emilio Grandes, and the rest of the management team. As usual, after the presentation, we will open up for a Q&A session. Now, let me pass to Juan.

Thank you so much, Javier. Good afternoon, and thank you for being with us today. ACS delivered excellent first-hand results in 2024 with solid growth of sales, backlog, and net profit, backed by strong cash flow generation. Over the last quarter, we have implemented important strategic initiatives that strengthen our competitive position. Number one, in May, Criteria Caixa one of Europe's leading investment holding companies, announced it had become a core shareholder of ACS after acquiring a 9.4% stake via the exercise of the financial derivatives we held. Today, Mr. Isidro Fainé has been appointed as member of the board. We're extremely proud to have him on board. Also, the cash settlement of these derivatives is providing us with further firepower to deliver on our investment plans. Number two, last week we agreed to acquire Dornan Engineering, a rapidly growing advanced tech engineering company based in Europe. This transaction will allow Dornan to accelerate its strategy to expand in European data center, biopharma, life science, and industrial markets. Third, today we announced the creation of Lateran Dragados, a leading North American civil construction company. by combining Dragados and Coctif engineering and construction subsidiaries in the US and Canada. This transaction approved by Coctif, Dragados, and ACS boards will enable us to best deliver our engineering and construction strategy in a consistent and more efficient way in the rapidly growing North American market. And fourth, in April, CIMIC increased its ownership to 60% in the natural resources company TIS. This deepens the group's commitment to the global energy transition by increasing our position in a resources and critical minerals industry. Ortiz is a global leader. I will later further explain these important initiatives that increase competitiveness, optimize operations, and enhance our capacity to provide higher value for clients and stakeholders. Let's start the presentation with an overview of the financial results. The group posted a net profit of €416 million, up 8.1%, where 8.6% effect suggested. Net ordinary profit, which excludes the non-cash gains generated at CIMIC, amounted to €335 million in the period, up 11.4%, in line with the top range of our 2024 guidance. In terms of cash generation, the group continues to perform very well. A strong second quarter has allowed us to deliver in this half year 358 million euros in net operating cash flow. This represents an outstanding improvement of 749 million year-on-year, mostly driven by strong working capital performance supported by Tragados and Turner. On the back of this solid cash flow generation, our net debt position at the end of June was 1.6 billion euros. This is essentially the same figure as in March. despite having incorporated 1.1 billion from the TIS consolidation. This demonstrates the strong free cash flow generated in the second quarter, supported by the net operating cash flow of 1.3 billion and the settlement of financial derivatives with a cash flow of half billion euros inflow. From a backlog perspective, the first half has been very positive. The order book grew by 13% to more than 86 billion euros, a record in the company's history, supported by an outstanding $27.5 billion of new awards. This backlog is the result of positioning the group as a leading company in growth infrastructure markets, such as energy transition, new sustainable mobility, and digital infrastructure. Currently, lower risk contracts represent more than 85% of our backlog. Let's look in greater detail at the consolidated results for the period. Revenues reached €18.7 billion, up 6.3% effects adjusted. EBITDA grew by 12%, delivering a 6.2% margin. Ordinary net profit reached €335 million, up 11.4%, adjusted for extraordinary items in both periods. Earning per share grew by 8.8%, reaching 1.62 euros per share. On the next slide, ordinary net profit is broken down by segment and company on an achievable basis. Integrated solutions and ENG show resilient profitability, with Turner becoming the largest contributor to ACS net profit, representing 41% of the ordinary end path after growing 47.5% year on year. Infrastructure had a lower contribution than last year due to non-operational items. Abertis, despite its strong operational performance, was impacted by new tax regulation in France and financial costs from the new asset acquisitions, while Iridium's contribution was consistent with its lower stake in SH288. Turning to cash flow performance, I would like to highlight the strong net operating cash flow generated supported by an outstanding working capital evolution. The movement of €405 million year-to-date represents an improvement of €659 million year-on-year. Key drivers of these improvements are Dragalos, with positive working capital contributions in the period of approximately €500 million better than last year, and Turner €100 million better. Dragalos' stronger cash generation results from improvements in working capital management in North America and a better contracting risk profile. And overall, there is an increase in the use of factoring facilities driven by the sales growth, including incorporation of these. As a result, net operating gas flow in the first half, impacted by the usual seasonality, improved by €749 million compared to the same period in 2023. If we look at the last 12 months, the group has generated a very solid €1.8 billion up by more than 900 million year-on-year. Our net debt position as of June stood at 1.6 billion euros, including 1.1 billion consolidated from this as of June 2024. This represents an increase of 440 million versus the June 2023 field. However, when excluding the consolidation effect of this, debt movement would have been positive by 642 million in the last 12 months, on the back of the outstanding 1.8 billion euros net operating cash flow. The strong operating cash flow generation supports our investment plans, which are aligned with the corporate strategy shared during the capital market stay. Accordingly, our strategy capital allocation decisions during the period include the sell transactions, which are crucial for our growth and risk reduction goals. In February, All shareholders of Abertis contributed €1.3 billion in equity to support the financing of the US and Puerto Rico acquisitions and the company's growth strategy. ACS subscribed to its 50% share with a €650 million investment. Another major step in our strategy was taken at the end of April, when CIMIC announced it had reached an agreement with Zellio to acquire an additional 10% equity interest in this. The acquisition for a purchase price of 320 million Australian dollars increased the group's ownership of this to 60%, increasing operational control of the company. Consequently, Simic has fully consolidated this for two months during the second quarter. Following the transaction, the put option for the remaining 40% is accessible between April 2025 and December 2026. Also during the year, we have continued executing bolt-on acquisitions to enhance and expand our engineering, digital, and logistic capabilities in target market segments. CIMIC has acquired several engineering firms in the critical mineral space, including Prudential, Minsol, and Mintrix. This also announced the acquisition of Pybar, an underground mining business that will complement this capability. We have also been active on the sustainable mobility front, with skyports and glideways transactions. There is development of data centers, such as the one in Madrid, share LPPs, and renewable generation assets in Australia. Overall, we have invested approximately 100 million euros across the group. Another important angle of our strategy is to deliver attractive shareholder remuneration. During the last 12 months, the group has devoted 793 million to remunerating our shareholders via cash dividends, share dividends, and active share buyback programs. Our balance sheet position remains strong. Last week, a sample confirmed the company's investment grade rating at triple B-minus with a stable outlook. Maintaining an investment grade rating is a key principle for FAR financial policy. Moving to slide 7, our order backlog stands at 86.7 billion euros, at 11.5% FX adjusted. This growth is a consequence for SWAT-8 positioning in new generation infrastructure markets. Around 50% of new orders come from this segment. The book-to-bill ratio, a leading indicator of our growth, stands at 1.2 times. This provides us with confidence to deliver our targets for the coming years. This is also reflected in the current backlog visibility of 26 months. In addition, we continue to the risk order book through lower risk contract models, which currently account for more than 85% of the total. On the next slide, you can see a selection of recent awards. I'm not going to name them all, but let me highlight a few. In the energy transition sector, we have been very active, especially in Australia, with the award of several contracts related to power generation, storage, and transmission. It is worth mentioning the recent award of the South Bay Transit Operations Center in Miami, a new electric battery buses operations and maintenance facility. In digital infrastructure, We have recently been awarded the project to build a semiconductor fab in Germany and large projects to build data centers in Asia, US, and Europe, including the $800 million data center campus in Jeffersonville, Indiana, for Meta. In new sustainable mobility and civil infrastructure, we continue to lead the market as a reference contractor for large-scale projects in Australia, North America, and Europe. Also, in biopharma, health and education and social infrastructure, we have been highlighted successful with different jobs to build or refurbish hospitals, sport venues and educational facilities. Let's move now to a more in-depth look at each of our segments. As you can see in this slide, Turner sales grew by 13% reaching 8.6 billion euros. EBIT and PBT significantly improved year-on-year. We are starting to see the margin we expect at Turner as it moves towards our target of 3.5% in 2026. It is currently at 3% in the second quarter, up 70 basis points year-on-year, supported by a successful strategy in advanced technology and source blue supply chain solutions. Outstanding cash flow generation has been a feature of Turner for many years, and the first half of 2024 is no exception, with operating cash flow increasing by around 150 million year-on-year euros. Turner's commercial strength is demonstrated by its new orders of 13 billion euros during 2024, an increase of 36% year-on-year. This momentum has brought its backlog to 30 billion euros, up by 24% year-on-year, a sustained growth trend in recent years. As announced last week, Dornan has signed an agreement to acquire 100% of Dornan Engineering, a rapidly growing European advanced tech engineering company, for an enterprise value of approximately 400 million euros. Headquartered in Ireland, Dornan is a leading mechanical and electrical engineering company in Europe, operating in data center, biopharma, life science, industrial, and other sectors. Dornan has a strong presence in the UK, Ireland, Germany, the Netherlands, Denmark, Switzerland, and other European countries. The business is expected to achieve revenues of around 700 million euros and an EBITDA of around 55 million in 2024, implying an acquisition multiple of approximately 7.2 times. Revenue growth has averaged over 20% in recent years, backed by an expanding order book that currently stands at close to 1.1 billion. The current shareholders, who are part of the key management team, will remain in their position post-transaction. Dornan and Turner share a similar business model and risk approach, as well as many direct relationships with blue-chip companies and hyperscalers. This is where the acquisition will allow us to further leverage our strong engineering, project management, commissioning, procurement, and modularization capabilities. Dornan's 1,000 skilled employees will provide additional resources to the group. The acquisition will be executed by Turner and will accelerate the company's strategy of expanding into the European market. Let's now move to CIMIC, where we foresee significant growth opportunities in the energy transition and the natural resources markets, supported by an active and managed strategy. Recent transactions, such as the 10% acquisition of TIS and the various Bolton acquisitions explained earlier, are good examples. CIVIC delivered a solid attributable ordinary input of 99 million euros, up 8.6% as I suggested, reflecting our increased stake in HoCTIF over the last 12 months. Net operating cash flow performance incorporates typical seasonality and structural changes in the working capital profile, aligned to labor risk collaborative contracting models. And new orders of 6.1 billion euros were 4% higher year-on-year with a robust order backlog of 24.6 billion, up 6% year-on-year. Turning to engineering and construction segment, we reported 4.7 billion euros of sales, up 6.7%, EBITDA growth of 6.2%, maintaining a stable margin, achievable impact grew by 7.5%, and net operating capital improved by almost 400 million year-on-year, reflecting the positive performance of Fragados in working capital management. The order backlog continued to grow at a 9% rate that is adjusted and currently stands at 29 billion euros, with a strong contribution from a new sustainable mobility and transport projects. Order intake during the year reached 7.3 billion euros. Today, we are also announcing the decision to integrate ACS Group civil engineering and construction businesses in North America by incorporating Flatiron Truckhouse North America activities into a single entity. This will result in the creation of a leading civil engineering and construction player in North America that will rank number two in the US market. The new entity for Tyrone-Trakatos will benefit from parallel expertise, broad geographical footprint, and solid technical capabilities. The advantages are immense. It will be a leading player combining credentials in the US and Canada, highly skilled technical resources, and a successful track record in large infrastructure projects. It will simplify the group structure in North America, ensuring strategic alignment across tendering, procurement, and commercial approach towards collaborative models. The transaction will generate meaningful synergies, estimated at around $30 to $40 million run rate, focused on procurement, shared services, and centralization of a wide range of corporate functions. This is a significant further step in the group simplification strategy that will allow for greater operational integration and tighter strategic alignment. The transaction is biocreative for shareholders based on significant available financial benefits. Let's now look at the breakdown of the contribution from different companies that comprise engineering and construction segments. Dragado sales grew by 3% in the first half to 2.9 billion euros. EBITDA increased to 152 million Profit before tax of 66 million euros was up 25% due to improved financial efficiency. Backlog is 17.9 billion euros, up 10.5%, with a strong focus on transport and new sustainable mobility. North America currently represents 59% of the total. And net operating cash flow went up by 413 million euros in the last 12 months, driven by a significant improvement of circa 500 million in working capital. Turning to HOKTIV's engineering and construction activity, sales growth in the year was 13% year-on-year, rising to over 1.8 billion. At EBITDA level, growth was 12% with stale margins. Net operating cash flow was treated by seasonal working capital variations, and the order backlog of 11.3 billion euros was up 7% year-on-year, with two major project wins in Europe worth over 1 billion. Lastly, let's move to infrastructure. The attributable net profit contribution in the segment was slightly lower than the previous period, impacted by non-operational items, the smaller participation in the 3.88 iridium, and the impact of the new tax regulation in France and financial costs from new asset acquisitions at Abertis. Operationally, Abertis has had robust performance, as shown in its results released last week. To summarize, Abertis average steady traffic was up by 0.8% in the first half, with revenues and EBITDA up 11% and 13% year-on-year on a comparable basis. Net profit per BPA amounted to €402 million. The Abertis profit contribution to ACS after BPA was €89 million. For 2024, we expect Abertis will make a similar profit contribution to last year. On slide 19, you have further information on a geographical basis to help explain the evolution of the portfolio of Abertis. highlighting the significant traffic growth at important markets such as Spain, Brazil, Mexico, and Puerto Rico. To conclude, I would like to underline the highlights of our solid operating performance. 11.4% growth in ordinary net income at the top end of our 8% to 12% of our annual guidance. Strong cash flow generation supported by working capital management. Record level of further intake during the period, providing visibility to our long-term outlook and further derisking our backlog profile. We also continue to make significant capital deployment in alignment with our strategic plan, with 1.2 billion euros invested in the first half. In summary, we are on the right track for achieving our long-term targets by delivering a consistent corporate strategy centered on three key pillars. First, reducing the group's risk profile, which we are achieving by the greater use of our collaborative-style contract. Second, expanding our already strong presence in strategic high-growth areas would demand a more sophisticated value proposition and would start driving higher margins. And third, a very disciplined capital allocation approach, as we have done during this year, that we believe will start to yield attractive returns in the future. Thank you very much for your attention. Now, we are ready to answer your questions.

Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star 5 on your telephone keypad. Thank you. The first question comes from Graham Hunt from Jefferies.