Hochtief Ag

Welcome to everyone and thank you for joining us for the presentation of Hawk Thief's results for the first nine months of 2023. I'm Mike Pinkney, Head of Corporate Strategy, and I'm here with our CEO, Juan Santamaria, and our CFO, Peter Sassenfeld, as well as our Head of Capital Markets, Tobias Loskamp, and other colleagues from the Senior Management Team of Hawk Thief. We look forward to taking your questions later, but to start off, our CEO is going to run us through the key aspects of our performance during the first nine months of the year. Juan, over to you.

Thank you, Mike, and thank you, everyone on the team. Good afternoon to everyone, and thanks for joining us. Octis has delivered a strong performance during the first nine months of 2023, with solid sales and profit growth, as well as firm cash generations. Another highlight of the figures is the exceptional growth in new orders, which is driven by our strategic focus on the growth opportunities in the rapidly expanding areas of high-tech, energy transition, and sustainable infrastructure markets. This strategy is driving strong order backlog growth, positive profit momentum, and a steadily improving risk profile, and is accompanied by a prioritization of ESG. Let's look at some of the key highlights. Sales increased by 6% year-on-year during the January-September period to $20.4 billion, up 11% on an FX-adjusted basis. Margins remained robust. EBITDA rose 5% to $908 million, or 10% adjusting for FX. Operational net profit for the period rising 6% to $403 million, were over 10% FX adjusted. As you can see, there has been an FX translation headwind of around 5%. The third quarter saw strong performance in Hocty's underlying gas flow from operating activities, which increased by €135 million year on year, with an LPM figure of €1.3 billion, reflecting the group's strong gas conversion. And the group balance sheet remains robust. In the last 12 months, net debt has been reduced by 158 million, with an underlying improvement of 478 million year-on-year, driven by the solid cash generation of the group's businesses. New orders during the period saw exceptional growth of almost 40% year-on-year, effects adjusted to 27.8 billion euros. If we jump to slide 6, we can see the group's wrong cash flow performance in more detail. During the third quarter, our businesses generated 194 million euros in cash flow from operating activities, up by 135 million compared with last year. And if we consider the nine-month period, the 208 million cash flow figure highlighted is almost 90 million higher year on year. Adjusting for seasonality, the 1.3 billion last 12 months figure reflects a sustained high level of cash conversion for the group. We can look at the positive net cash evolution. At the end of September, we have a slightly net debt position of 68 million following the payment in July of just over 300 million euros in dividends to active shareholders. If we adjust for this dividend and some other non-operating effects, the underlying year-on-year variation is a solid 478 million improvement. And I would note our September 2023 figure. incorporates a significant fixed translation impact, which lowers what would have been a solid net cash figure by well over 200 million euros. The next two slides give you more detail on the group's strong orders momentum. New orders show exceptional growth of almost 40% year-on-year, if it's adjusted, to 27.8 billion euros. This is 7 billion above the comparable 2022 period. and it's a consequence of the group's focus on high-growth areas, which accounted for over half of all the work secured in the period. Another benefit of the group's fatigue focus is that these high-tech infrastructure projects are a key ingredient in further driving the group's risk in progress. The vast majority of the group's new orders are now being secured under collaborative, alliance-style, or construction management services-type contracts. all of which incorporate robust risk-sharing mechanisms. At the end of September 2023, the group's order book stands at 56.1 billion euros, up by 3.3 billion year-on-year, or 14% on an FX-adjusted basis. Of this total, the proportion of lower-risk contracts is now around 85% of the total, and it is worth highlighting that the remaining 15% has a substantially improved risk profile compared with the past. Moving on, you can find more details of the solid performance of our divisions in the presentation, and I would just mention a couple of highlights. The Americas Division has delivered an impressive set of numbers. Revenues are 7% up year-on-year in USD terms. There's positive margin momentum and outstanding cash flow performance with a year-on-year increase of 185 million in the nine-month period and 150 million euros in the third quarter. and nine-month new orders growth of almost 50% in local currency. Seeming nine-month results show a strong revenue growth of over 20% in Australian dollars to $9.6 billion. Margin variations year-on-year are in line with the trend we saw in the first half, affected by higher revenue from the zero-profit Westgate Dino project and other project mixed effects. The cash flow metrics reflect seasonality and continue to be impacted by a transition to more lower-risk collaborative projects with lower associated mobilization payments which accompany them. Looking forward, we expect a strong cash flow performance in Q4. And CIMIC's new orders show growth of 14% to just over 14 billion Australian dollars. In terms of the numbers from our Euro division, two things stand out. The very high increase in new orders year-to-date to 2.6 billion euros versus 1.1 billion last year, and a strong cash flow momentum with a 17 million euro improvement year on year. Finally, in this section, I will talk later in more detail regarding avertis, but it's worth noting from the nine-month results that revenues were 11% higher at 4.2 billion euros, with average elite traffic 3% higher and tariffs up 8%. An EBITDA of 2.9 billion euros, was up 12% driving a 15 million higher year-on-year contribution from Abertis to Hoctiv's net profit. I wanted to take a few minutes now to update you on how we're advancing and delivering our strategy. Hoctiv continues to advance in the delivery of its corporate strategy. We have consolidated our core market positions and are rapidly expanding our presence in the structural growth areas of high-tech energy transition, and sustainable infrastructure. Furthermore, we have achieved another milestone in the next phase for our strategy with investment of equity in these high-growth areas, which makes use for extensive know-how and experience in PVPs. In essence, we are approaching our growth market opportunities in three key ways. Firstly, as an infrastructure services provider, both on the engineering and construction management side. as a supply chain and logistics partner, and thirdly, via equity investments. The Q3 highlights in our key growth areas are as follows. The digital infrastructure sector continues to expand in all our core markets. Data center market growth is being driven by the insatiable demand for higher computing capacity and artificial intelligence. During the third quarter, Toron was awarded orders for several new data centers in the U.S. worth 1.1 billion euros or 1.9 billion euros in the nine-month period, and our U.S. company is being presented with numerous opportunities. CIMIC has won several data center contracts in Hong Kong, Philippines, and Malaysia this year, worth approximately 450 million Australian. In Europe, Octi was awarded a data center contract in Warsaw. Furthermore, we have identified a significant pipeline of data center equity investment opportunities in Europe and Asia-Pacific. In Germany, for example, OKTIV, an infrastructure partner, will invest in decentralized and sustainable data centers in metropolitan areas. The infrastructure associated with sustainable mobility in smart cities is a long-term structural growth market. In a significant milestone for the business, A Hochtief JV has been awarded a contract to finance, plan, build, and operate a fast-charging network for electric vehicles by the German Ministry of Transport. This is part of the federal government's Deutschlandnetz tender, which targets a Germany-wide near-term rollout of fast-charging points. Total investment amounts to around 250 million euros, which will include a substantial double-digit equity investment. Signal models are expected to be replicated in several other European countries to meet the increasing demand of EV chargers and we are well prepared for the opportunities which will emerge. This project illustrates this group's strategy to invest equity in high-tech growth sectors where we can apply the financing, project management, and operation maintenance capabilities built up over many years in PVPs. Energy transition is a key megatrend for the foreseeable future, and one where Hoctave can add a lot of value for clients. Already a leading EV battery gigafactory builder in the US, Piatano would have an order book of 1.8 billion euros at the end of September, including Panasonic Energy's EV battery production facility in Kansas and an electric vehicle battery plant for Honda Energy Energy in Ohio. In Australia, Pacific Partnerships has acquired the development rights for the 300 megawatt Hopeland solar farm in Queensland, the second large-scale solar project to be owned and developed by the company. Pacific will develop, invest equity in, and manage the delivery and operations of this solar energy project, which will have the potential to generate enough independent electricity to power approximately 100,000 average-sized homes in Queensland. Simic Sub-Series UGL has won an order for an expansion of a battery storage energy system for NEOEN, one of the world's leading producers of renewable energy. This scheme is key to support the global energy transition in relation to electric vehicles. UGL has been awarded several contracts with energy and minerals processing clients in Western Australia, including a $300 million project for the provision of construction services at a lithium hydroxide plant. The client, Abemar, is the industry leader in lithium and its derivatives. Also, during the third quarter, Simic Subsea Research Man acquired a Canadian engineering and metallurgy company, Novopro. With a strong know-how in lithium processing technology, Octiv gains additional access to opportunities in this expanding sector, as demand for batteries and electric vehicles increases, while enhancing the group's North American presence and offering to clients. This bolt-on acquisition is consistent with this strategy of expanding our presence in the added value chain of high-tech infrastructure. Another element that is essential for the energy transition is nickel. Our company, TEAS, has been awarded a $240 million nickel mining contract, marking this its second successful venture in the Indonesian nickel market this year and reflecting its capability to deliver world-class mining solutions for the metals industry. The project is also consistent with the company's strategy of diversification by commodity. Another growth market related to energy transition is hydrogen. The developing energy market opportunities related to hydrogen and ammonia provide significant potential for the group. In Australia, for example, Garmin has a stated ambition to become the world leader in hydrogen by 2030, with potential related investments of up to 300 billion Australian dollars. CIMI has been involved in several major front-end engineering design studies based on its engineering expertise, and we are currently constructing a hydrogen-ready power generation plant in New South Wales. Social infrastructure is another long-term structural growth market for Hoctee. In August, NFL team, the Tennessee Titans, announced that a consortium, including Turner and an AECOM subsidiary, will serve as construction manager on its new stadium project with an expected total value of $2.1 billion American dollars. The joint venture will oversee the pre-construction and construction management services. Turner and Acom have successfully worked on 17 of the 30 most recently completed NFL stadium projects, including the Sophie Stadium in Los Angeles, which will host the opening and closing ceremonies of the 2028 Olympic Games. In Australia, CPD Contractors has been selected by the Queensland Government as Managing Contractor for stage one of the new Bindaberg Hospital. CPV will lead the design phase of a project with total value of 1.2 billion Australian dollars, which is part of the regional government's 9.8 billion Australian dollars health and hospitals capacity expansion program. Fence is another structural growth area in which the group is strongly positioned due to its existing sector and security credentials and relationships which stretched over decades. UGL has won a contract to provide SWATIC advance advice, planning, supply management, operations, and maintenance for the Australian Defence Forces Fuel Network. The contract will generate approximately $500 million in revenue for UGL over six years. UGL will provide all operational maintenance services throughout the Defence Fuel Network nationally. as well as strategic asset advice and management of the Australian Defence Forces' fuel supply requirements across Australia. The CPV joint venture has also been selected by the Australian Government's Department of Defence to undertake design development activities for the Woomera redevelopment programme. Pending government and parliamentary approvals, a delivery phase consisting of upgrades to buildings, services and infrastructure is expected to follow. with an estimated value of between $500 million and $700 million. In the U.S., the Army Corps of Engineers awarded Turner Construction Company a $389 million contract to construct two buildings at an earth base outside Omaha, Nebraska, and make operations more resilient to potential flooding. Supply chain and logistics. are critical to success, especially for our clients in data centers, EV batteries, and the other high-tech infrastructure markets we're pursuing. To meet these challenges, we have developed SourceBlue, which is Turner's supply chain specialist with a rapidly rising procurement volume of over 1 billion euros in the last two years. The business utilizes its strategic relationships, digital systems, and logistics expertise to deliver transparent and collaborative solutions that improve project schedules, costs, and procurement challenges. The company transforms the traditional procurement process by increasing visibility throughout complex supply chains. It can thus provide clients with reliability on where equipment and products are sourced, experience with over 130 supply chain experts and procurement specialists. Furthermore, it offers Early engagement with designers and engineers, facilitating collaboration and complex challenges from design to delivery. This rapidly expanding business has seen revenues double in the last 12 months. In order to expand SourceBlue's capabilities, Octiv is also developing supply chain in the Asia Pacific region with the creation of a logistics hub to accelerate the group's digital delivery capabilities. Capital allocation will play an increasingly important role in the strategic development of our company, with both transformational M&A and bolt-on acquisitions. As described earlier, we have begun to deploy equity capital in several high-tech infrastructure growth sectors. In addition, we continue to boost our engineering know-how via bolt-on acquisitions, such as the Canadian NovoPro transaction I mentioned earlier, and most recently, via the agreement by UGL to buy telecommunications services arm of SkyBridge. The company is an Australian installation maintenance contracting company, which specializes in the fiber, wireless, and satellite telecoms markets. The acquisition includes the transfer of intellectual property and engineering capabilities and supports UGL's continued strong growth in the sector. Let me move on and talk to you about the recently important developments at Abertis. In July 2023, we reached a new strategy collaboration agreement with Mundis with the objective of strengthening Abertis' global relationship in transport infrastructure concessions. Our partners are committed to promoting an investment plan to expand the portfolio of assets and their management and promote Abertis' growth and value creation while maintaining an optimal capital structure in line with the requirements of credit rating agencies. The agreement also includes a new governance scheme whereby the partners will appoint 12 board members in equal shares, as well as the appointment of the chief executives. Thus, Mondes will continue to appoint the CEO and the secretary of the board, while Hochtief ACS will appoint the chairman and the CFO. In addition, the ACS group agreed to transfer a 56.76% interest in the 288 Manas Lane Highway project. in Houston to Abertus for 1.53 billion U.S. dollars. The total concession has a remaining lifetime of 45 years until March 2068 and is a high-quality transportation asset comprising 17 kilometers of mass lanes with dynamic tolling where tolls can be adjusted to maintain traffic above the target speed. The acquisition leverages Abertus' existing presence in the U.S., and will achieve synergies within a solid regulatory framework. In mid-October, Avertis announced that it had won a tender in Puerto Rico for four toll roads with its 2.85 billion bit US dollars. The company has been awarded the concession right to operate four highways in Puerto Rico for a period of 40 years, expiring 2063, after a competitive privatization process. Tall roads comprise 192 kilometers, representing over 60% of the island's tall traffic, including highly strategic connections to the capital, San Juan metropolitan area, with alternative routes being very limited. They also inject attractive tariff mechanisms with increases exceeding inflation and a solid legal system in which US federal laws apply. And also, worth flagging that there are significant operating efficiencies with Abertis' existing Metropista concessions. These two transactions are aligned with Abertis' long-term strategy of owning, operating, acquiring high-quality strategic toll roads that continue to extend the group's concession-based cash flows. Furthermore, these transactions reinforce Abertis' core exposure to hard currencies while leveraging its existing presence in the U.S. Both concessions contribute to cash flow generation from inception, given existing high traffic levels and EBITDA margins. The shareholders will contribute 1.3 billion euros to support the financing of these transactions. Abertis will thereby maintain an optimal capital structure in accordance with the commitments to maintain its investment grade rating, which S&P has just confirmed. So, in conclusion, let me briefly summarize where we are and how we see the business developing. Octiva achieved a strong set of results. Sales and profits are growing at double the rates in local currency terms. Margins remain robust, and we reported a strong Q3 cash flow performance. And new orders show exceptional growth of almost 40% year-on-year, as I suggested. The SOTEI focus on rapidly expanding high-tech energy transition and sustainable infrastructure markets is driving a strong orderable growth, a positive profit momentum, and further improving risk profile. And we have started deploying capital in high-tech infrastructure sectors, including renewable energy, data centers, and electric vehicle fast-charging networks. We continue to consolidate and expand our engineering and technical know-how via bolt-on acquisitions, and we're rapidly developing our logistics and supply chain services, and our delivery on ESG targets remains on track. Looking forward, we expect a seasonally strong cash flow performance in Q4, and we confirm our guidance for 2023 for an operational net profit in the range of 510 to 550 million euros. Thank you very much to everyone for listening, and now I welcome your questions.

We're ready for questions, operator. Thank you.