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Buenas tardes, bienvenidos a la presentación de resultados de Dominion.

Good afternoon and welcome to the earnings presentation of Dominion.

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Before starting, we would like to remind you that once we finish with the presentation, we will open the Q&A session. So you can leave your question in writing in the section in Zoom, or you can speak on the telephone or raise your hand on the platform. So I'm going to give the floor to Roberto Tobias, who's the Director General of Dominion and Patria Verón. Good afternoon, everybody, and thank you for your attendance, for participating in this earnings release. And we published the results this morning before the AGM took place. So we are closing a very good quarter. We have very good earnings. We have record figures, absolute record figures. adjusted sales have grown four percent and in their growth forex contributes 0.8 and inorganic impact is uh hardly material it's uh minus 0.2 and in fact divestitures in the period exceed new investments just to remind you last year we had divestitures of small businesses in the area of digital services within our strategy of leaving those businesses that have lower margins or cannot be improved in terms of efficiency. Our traditional operational leverage has made this growth of 4% in sales become a growth of 9% at the level of EBITDA, EBIT and EBIT compared to the first quarter of 2021. And in all cases, there's been an improvement in margins relative to sales between 30 and 50 base points. But in order to evaluate how our net profits have evolved, we should take into account that from now onwards, we have a minority shareholder in the renewables business. Before, it was a 100% Dominion business. So in order to establish this comparison at a constant perimeter relative velocity, in other words, to see how what organic evolution has been like, we have to consider the profit prior to the allocation of the results to this new minority shareholder. So this first quarter of 2022, we've reached 11.1 million euros that represent 4.2% relative sales, which is the biggest net profit over sales that we've ever reached and which is 23% higher than the figure reported for the previous year. But if we were to review segments, all of them have grown as regards sales. And now we're going to see how the dynamics that have affected the different segments have made them behave differently too, as far as margins are concerned, the two segments. That is, B2B, both services and projects, have a very good level of performance, both in terms of sales and margins. And both of them account for 90% of the contribution margin of our company and 83% of our sales. So therefore, this is the main business, or most of the activities are focused on B2B. services have grown 5% in terms of sales in line with the growth that was forecast by our strategic plan. And there's been an improvement in margins of 20% relative to the figures recorded last year. So in other words, we now have 11.6% relative to sales. This is the biggest contribution margin for first quarter. And if you take a closer look, traditionally, Q1 of the year has contribution margins relative to sales lower than the rest of the year in this particular segment. So we also have very good progress in the projects in LATAM and the renewal of contracts in the industrial sphere, as well as automation contracts at industrial plants, as well as environmental services. But now we are now entering the ramp-up period of the recent contracts that were won in Germany and Spain related to telecommunication networks and electricity networks. You know that we are now operating in Germany, and as I said, we are ramping up the contract that was awarded to us in the eastern part of the country. But on the other hand, we have the executions... Well, I hope that you're listening to me because it seems that we have a message here, somebody saying that you can't hear me clearly enough, but let's try to improve our connection. Well, anyway, I was now going to talk about what we've done in terms of projects 360 that have advanced as scheduled in terms of industrial infrastructures and environmental solutions. And we are also now covering the first steps, like, for instance, the funding that is required to start work at the Windbeiner Hospital in Chile in the second half of the year. And we are also speeding up the renewable projects where we've already finished a new solar facility in the Dominican Republic. And in Spain, we've started three projects with a total of 450 projects. 45 megawatts. But in the case, the segment has grown 9% of the contribution margin has grown and the margins are 17.59%, which is over and above what we expected, which was 15%. And we also have a very healthy portfolio, which means that we have a portfolio at the end of this first quarter of about 600 million euros. It hasn't been a good quarter, however, for consumption, mainly as a consequence of inflation and the high prices of energy, because as you know, these prices are still very high. And this is something you can see in the margins of the B2C segment that have dropped to 8% relative sales because of the additional efforts we have to carry out. and also because there are more defaults and because energy is more expensive. This has had a repercussion on our portfolio of energy customers that has dropped as we saw in the last part of the year. And even so, sales in B2C are 4% above the figure reported the previous year, thanks to other verticals like the case of Rentik. our renting service so for high range mobile phones where we have more than 1 000 newcomers every month and which is a very important vertical to increase the life time value for the customer because it guarantees their permanence during longer periods of time and also thanks to the very good behavior of the vertical of telecommunications which at the closure of march has 194 000 active services which is more than 2.5 times the number of services we had exactly one year ago. But we've also recently launched a significant advertising and marketing campaign that we can see on the television and that will be present throughout the entire year. And we've also opened new alliances to expand our distribution channels, like the recent agreement signed with Photoprix. You know that in this first quarter, we did not publish a balance sheet, and there are very few remarks to be made. We are continuing as we had the situation last year, where we generation of operational cash is covering the back buy of shares and the second back buy program on March the 31st reached 2.5 of our own shares and now it's nearly three percent and we've invested as of March the 31st a total of 17.5 million euros of which 8.2 million euros have to do with with Q1 of 2022 and today during our AGM we've approved the payout of 14 million euros in dividends that will be paid out in the month of June. So as you can see, it's been a good quarter, although the context is not the most favorable of them all, with many, many uncertainties and many macro variables to be taken into account. And as I said this morning, we held our AGM and both our chairman as well as our CEO were stressing, among other things, that we are a company that is ready to carry on generating value in complex and uncertain environments. that we are not a cyclical company, and we have demonstrated that in recent years, with 2020 and 2021 far above the performance of other competitors. And both of them spoke about a culture of a way of doing things and of a management model, which is one of our differential signs as a company. So this is why we have somewhat less than two years to carry out our strategic plan, and 2022 should just be a continuous progression towards the fulfillment of these objectives thank you very much for attention and now we're going to move on to your questions and i would like to remind you that on this particular occasion you can use the chat or you can call in via the telephone or use the app the zoom app thank you okay well we're going to start off with a q a session and we need to give the floor to the people that have raised their hand and we're going to start off with one minute from Hello, good afternoon. Can you hear me clearly? Yes, loud and clear, Juan. Hello, good afternoon and thank you very much. I want to focus on services and these are two very specific questions that I want to make. And in this inflation context that is so strong, you've managed to improve your margins. in relation to 2021. But if this situation is maintained, do you think that customers might not be able to absorb all these cost increases that you're reporting? Point number one and point number two. Do you think that you will be able to achieve a double digit growth by the end of the year in the service division? Well, because of all the context that surrounds us and then that on the one hand, then in B to C and As regards to telecom and energy, the contribution margins that you presented in the quarter, well, there are certain circumstantial impacts, but do you think that they could be improved to go back to the levels you had before? Or do you think that there's a new context, your margins are going to be somewhat lower? That's all from me. Thank you very much. As far as the last question is concerned, Juan, let's say that these drops in B2C margins are somewhat lower than in previous quarters because of the circumstances. But in any case, we don't know how long this is going to last. So I suppose that everything will depend on how energy prices evolve. And it also depends on consumer dynamics. Yes, I also believe that it's something that is going to improve over the next few quarters, because in this first quarter, as Patricia pointed out, we have high levels of inflation and we have the impact of inflation, which is much more immediate. There's less traffic too. And what we're trying to do is achieve resilience and agility. we want to recover these margins and i think that this is going to be an isolated quarter and we should start to improve and this is what patricia said before about a greater diversification and photo bricks etc i think that this is going to help us generate more traffic in shops and more income that should produce improvements yes well we've already implemented actions and others that we will be taking and some of them for instance are the powerful campaigns we're carrying out in the social media or in the media and it's something that is going to last the rest of the year and i'm sure that it will recover more traffic for shops and this should also produce more sales and it should also improve margins And we also have other actions that we will gradually implement. And then as regards B2B, well, obviously, whatever has to do with services in Europe, we're focused on Europe and Latin America. I think that we've absorbed the inflation effect, and it's not that we've really transferred inflation to our customers. We believe that this has to do with productivity and with knowledge, with processes. It has to do with digitization. And the truth is that we do not have any concern as regards the possibility of maintaining these margins in terms of levels of growth. Well, I wouldn't really dare say anything. Q1 has gone reasonably well. and here we are basically talking about recurrences and we're talking about maintaining our activities but i think that it's far too early to give you figures to tell you if we're going to reach double digits or only a single digit whatever so we want to achieve as much as we possibly can but i think that it's still too early to give you this information to give you the data thank you very much thank you juan for the question Okay, Miguel Tocar, from JB Capital. Hello, can you hear me? Yes. Oh, hello, how are you? Well, thank you very much for giving me the floor. Three questions from me, please. Well, the first one is not a question, it's a request. And could you please give us the net debt figure on the closing date of the quarter? And the second one is a follow-up of the question that was just asked by Juan. But perhaps this has to do with the contribution margin of projects, which was 17.5%. And it's dropped somewhat below the quarters, the levels reported in previous quarters. Do you think that these levels are recurrent and are they above this 15% figure that you've always mentioned? And then also related to this and as regards what you mentioned, could you please say something a little bit more? about how the rise in the price of raw materials and what we're seeing in the supply chain, how this is affecting you in the execution of these projects, or do you have any clauses in place to perhaps transfer this increase to the prices of the contracts themselves? And finally, and as regards the convertible you have with VAS, I would like to know, could you give us more information, please, on the conversion deadlines for the loan And if it's going to be executed, how much would your stake go up? I think you have 35 right now, if I'm not mistaken. And would you be reaching levels above 50? And would you have to consolidate this activity? That's all from me. Thank you very much. Okay, I'll try to answer and then Patricia will give me a helping hand with this. But as regards the net debt, which is the first question, we obviously have not given you any balanced figures. And I think that the clue was given by Patricia. What we say is that operating cash flow in Q1 has, well, it means more use of cash in organic level. So that means we have healthy cash generation and it's still fully in line with our generation objectives in terms of Evita. And you were asking about projects B2B, which I think it was 17 point something percent in margins. Well, the truth is that this is something repeat year after year and quarter after quarter, and we are above 15%, far above. And here I would like to say that this year we're going to be above 15%. The strategic programme at least has this 15% as a target, although there are projects, very specific projects that we have of the 360 world, things that we're doing with a number of stakeholders and renewables, renewable projects, that I think that are going to allow us to maintain these margins above 15. But I can't really give you a more specific range. I'd say that they would be above 15. The increase in prices of raw materials, do they affect us? Well, yes, of course. And I'd say that we've had some problems in central European companies with seal. It's not the core business of Dominion, but in any case, it did affect us to a certain extent. at one of the plants and well as regards the rest of these issues these are margins that we have under control that we have in the portfolio and procurement is covered so there are some specific things in renewables i don't know the plaques that go on the top or the bottom and in the states now we're talking about um 82 percent of the panels are being stopped they come from china rather and this perhaps produces too much supply and prices might go down. And this is our day-to-day issue. I'd say that our projects are very healthy as regards visibility of margins, and perhaps they can be affected to a certain extent, but that's no big concern in relation to B2B. As regards to the VAS convertible, well, this is the 75 million euros have gone to VAS and with that leverage. And it means that VAS has the necessary amount of equity to carry out the projects that generate this virtuous circle. In other words, that we carry out these projects and it's a convertible and it's also a participative loan at the same time. And it's a participative loan that is based on the long-term approach that is in our fixed assets. And it's true that it does offer us the possibility of being executed. So it's something... that is on the table that could be in our roadmap. And this morning we heard the CEO and the chairman, what they were saying is that right now, our investment, our main investment in view of the M&A difficulties we're seeing and the excessive prices of many of the things that are in the market will have meant that we've decided to invest in our own shares. And here there could be assets, as we said, that at a given point in time of the conversion, the conversion that would give us a majority. In other words, we would have an extensive majority above 75%. That's very clear. And this will be included under the fiscal group and whatever. But in any case, it's something we're analyzing. And we're looking into this issue of being able to having assets, assets in which it's more of a professional segment. And we're looking into this in the midterm. And there's no doubt that this would give us recurrence. And I think that's the magic word that everybody's looking for in this environment. in this environment of having lots of visibility and stability and lots of recurrence in flows. So we are active and we've always been active in M&A. And if we don't find relevant operations in the market, well, you can see that we're doing things with our own actions and we're working pretty quickly. And this obviously, this conversion could be on the table. So we'll be studying this, and I'm sure that it's going to be discussed at future board meetings during the year. Patricia, would you like to say something? Or perhaps, Miguel, is it clear? Yes, yes, very clear. Thank you very much. Thank you, Miguel, for the question. Carlos Treviño from Santander, who now wants to take the floor. Hello. Good afternoon, Robert and Patricia. Many thanks for accepting our questions, several from me. Firstly, I would like you to confirm, please, that as you pointed out in the previous call in February, do you think that in 2022 you'll be able to achieve the individual objectives you've established for the strategic plan? because this is going to be a year with growth above 5% in organic and 20% in terms of net results. Another second question, I would like you to perhaps focus a little bit on the issue of inflation and what kind of increase have you contemplated as regards staff expenses for this year? And could you please say or tell us if you have any clauses with the customers that will allow you to transfer inflation and therefore increase contracts should inflation exceed a certain level? And the third question, well, it's several questions that are interrelated that are connected to the B2C business. And the first one, well, obviously you've grown 4% year on year in B2C, but bearing in mind that you've included the customers that you already have. With a 4% growth, I have some doubts. Does that mean that the underlying growth of your real income, has it been positive or not in the quarter? Could you give us some more clues on what kind of underlying growth you've had in the B2C business once you remove the customer's turnover and which gives us your income? And you also pointed out in the earnings presentation, you talk about a lack of competitiveness in energy. So could you please let us know what's going to happen in the short term? What is it you can do to solve that lack of competitiveness? Could you be a little bit more specific in this regard? And then with a somewhat mid-term approach, if you want, because you've been talking about different initiatives, you've been talking about marketing and advertising and the partnership you announced the other day. But for instance, last week, Telefonica announced a strategy through Mi Movistar, which is going to be your direct competition in most of the services that you people are offering. And I'm even talking about becoming involved in the field of energy. So... In view of the fact that you're going to have to deal with powerful competitors like Telefonica competing directly with you, where is your competitive advantage to be able to compete in a positive manner against them? And then finally to finish, and I'm sorry for speaking for so long, in B2C you spoke about the marketing campaign that's going to continue throughout the year. Could you quantify it? How much is it going to be and how much are you going to increase your costs compared to last year? because perhaps this could have a relevant impact on the margin. Thank you very much, and I'm sorry for asking so many questions. Well, Patricia and Juan Carlos, you both have to give me a hand on this one, or we can both do this. Well, first you spoke about, you were asking about guidelines. Well, with my gut feeling, with what I see and considering the portfolio, I'd say that, well, nothing makes me think that we are not on the right path, that we are already thinking about 2023 as regards to fulfilling this strategic plan without commitment of ours. And I would also add to what you've said, is that we have a fourth guideline, which is not to have indebtedness above two times EBITDA. So if we bring together these four criteria, as we mentioned in the presentation, well, nothing makes me think that we have not already done that. We feel confident, we are fully committed, and we have the ambition of getting things done. And then as regards inflation, what you were asking about, Carlos, as regards impact on wages, the There's a bargaining process in place for the collective agreement and we'll see what happens. So we don't really expect there to be significant increases that could have an impact on the margins. And there's something else that I mentioned that as far as structures are concerned, we are in exactly the same position as last year when we have the central structure for the corporation in Spain. And that we have, well, as we see things and as we see these levels of inflation, I think that they are not here to stay. And obviously, this is going to be clear over the year. It's going to be reduced. And I'd say that as regards structures, it's still flat. But as regards our workers in Spain, it's 11,000 people in the group. And obviously, in other latitudes, we don't have or they don't have those levels of inflation. And here, I think that we've also managed to manage the cost issue properly. So when people are saying that things are going up 8 or 9% because of the year-on-year inflation as of March. It doesn't mean that we have increased our staff expenses by 8 or 9%, certainly not. But what you were saying, Carlos, about clauses, about transferring the price, well, this is in all contracts, in all framework, they recognize these effects. And it's something that can be found in your daily negotiations with the customer too. So I'd say that nominally speaking, we don't really have any impairment. And as I said before, we are able to maintain that level. And now B2C, no, sorry, the guidelines. Well, I've finished the presentation by pointing out that 2021 is a year where we fulfilled our commitments and the same applies to 2022. And B2C. B2C, we've seen the effect of Q1, because obviously what we spoke about, the lack of competitive energy, we are aware of that. We've been aware of what's going on for the last three or four months. And we've thought about transforming EDP into... and transition platform. And we've thought about our concessions with VAS that we could implement PPAs to sell green energy through B2C. But what I mean to say by this is that I know that it sounds a little bit presumptuous, but well... Competition is in the market, and that's the arena in which we feel comfortable, regardless of whether it's Telefónica or anybody else. And we have a strength that is the possibility of connecting to the market. But it's important to have a competitive supply. And we are offering energy with pull prices that are above 200, and that's where you have a problem in relation to the incumbents. But in any case, yes, of course, we are working to solve that problem Because if these levels, these high levels are here to stay, well, you have to be flexible and agile as a company. And we're trying to find solutions for that. And obviously, I cannot make any disclosures here, but we are aware of the necessity to do so. But when you know that you don't have a competitive supply, you have churn problems and catchment problems. This is what we're looking into and turning around in this quarter. Well, having said that, and when one grows 4% at a nominal level, and when you had increases in the energy pool of two extensive digits and very relevant, well, if you linked that to the loss of customers that you've already seen in energy, Well, yes, you can see that that underlying factor of a real growth in what has to do with the sale of energy has gone down and it has an effect. And let's say that this is the only but we have for Q1 and that would be a decrease in the B2C margins. But once again, I think that there's an important message, says Patricia, which is what Robert said, is that we are aware. And as Robert pointed out here, the key issue is to have a competitive offer and limiting risks, which is what we've done until now. So we are living in a context that didn't have to do with the previous prices. And we saw that we had a very competitive offer to make and it also hedged our risks. And what we're doing now is working actively to find other solutions and finding other innovative formulas that will allow us to deliver something that is competitive but without taking on board any risks. So we didn't want to become involved in a mess. We wanted to transfer competitiveness in the market to the end customer because the market has a very high pool level. And obviously what you have to do is look into other options and other movements and reach other agreements under this common denominator that is called risk control and financial discipline, et cetera. And while we are all aware that we're going to be suffering for a few months, We're going to be suffering in our energy portfolio, but we have some very healthy portfolios like telecommunications or other projects that are already underway and are active, like the renting of devices, because that is going perfectly well. And we have some very significant operations with something that's very important too, and that is customers with a very good lifetime element because a two-year renting contract that is going to be extended because that customer is going to buy another mobile device or they're going to get another mobile and that customer is going to stay with us for a long time. And that's part of what we want to build. So in terms of energy, we know what the situation is like and we need to develop the necessary tools to change the situation and the rest of the verticals. The evaluation is very positive. Now to finish with the marketing campaign, where they said that the answer is phone heads, but I can't give you a quantitative answer, but it's going to be qualitative, Carlos. This is not going to have an impact on our results. And how have we negotiated that campaign? Well, I think that we have to take into account all of B2C, that is the aid or the help that you see from manufacturers and people that make their products available to sell and that has a damping effect. So this is not going to have a very big impact in terms of costs. Thank you very much for the answers. Okay, we have another question, another question through the chat, but I think that it's already been answered and that referred to the guidance for the year 2022. Okay, well, we have no further questions. We will close the earnings release here. Thank you very much for attending. Goodbye. Thank you very much. Bye-bye, everybody. Bye. Good afternoon.