Hochtief Ag

Good afternoon, everyone, and thank you for joining this HawkTea first half 2024 results call. I'm Mike Pinckney, head of corporate strategy, and I'm here with our CEO, Juan Santamaria, our CFO, Peter Sassenfeld, and our head of capital markets, Tobias Loskamp, and other colleagues from the senior management team here at HawkTea. We're looking forward to taking your questions, of course, but to kick off, our CEO is going to run us through the details of this strong set of numbers, as well as the important strategic acquisition that we've just announced. Juan, all yours.

Thank you, Mike and the team. Good afternoon to everyone, and thanks for joining us. Hoctiv has delivered a solid performance during the first half of 2024, with higher sales and profits supported by firm gas flow generation. This has been accompanied by a continued expansion of its order book, driven by a further substantial rise in new orders. In addition, the group has taken important steps forward in delivering on its strategy development with two significant acquisitions. Today, we have announced the acquisition of a rapidly growing advanced tech engineering company, which will accelerate Turner's strategy of expanding its presence in Europe. I will elaborate on this further in a moment. And, as I previously announced, Enable Hochtief increased its ownership of natural resources companies. This investment strengthens the group's business profile and underlines the strategic importance of the global energy transition for the group. So let's take a look at the key figures for January-June period. Group sales of 14.6 billion euros show a 7% increase year-on-year. Octiv's operational net profit rose by 11% to €301 million, or 18% on a comparable basis, adjusting for the global consolidation of this for two months as well as the divestment of Ventia in 2023. The nominal net profit of €436 million includes a one-off non-cash gain at CIMIC of €146 million net of provisions. The cash flow performance for the period includes a characteristic seasonal movement seen during the first quarter of the year. Looking at the last 12 months, operating cash flow stands at a strong level of 1.7 billion euros, reflecting a high level of cash conversion. Octave ended the period with net debt of 1.1 billion driven by seasonality as well as its strategic capital allocation decisions. Adjusting for these decisions, net cash would show a 736 million year-on-year increase. And as a consequence of the continuous wrong growth in the orders, the group's order backlog ended June 2024 at a record level of close to 66 billion euros, up 23% year-on-year, or 14% on a comparable basis. Looking at the cash flow performance in more detail, I would note that the last 12 months' performance, with operating cash flow of 1.69 billion euros, implies an increase of over 400 million year-on-year, or well over 300 million year-on-year, adjusted for the impact of factoring variation. The net operating capex figure includes mainly job-costed tunneling and mining equipment purchased and deployed for major projects at CIMI. Net operating cash flow for the period was 82 million euros and compares with the 29 million cash outflow last year. On the next slide, we can look at the movement in cash. Octave ended June with net debt of 1.1 billion, driven by seasonality as well as the consequences of strategic capital allocation decisions taken during the last 12 months. Principally, the full consolidation of this following the increase in our stake from 50 to 60%, the Abertis capital increase where Hochtief described its 260 million share, series of Bolton acquisitions, which I will describe in the course, and the Hochtief dividend of over 300 million. Adjusting for these impacts, We have a year-on-year improvement in the net cash position of 736 million euros. Moving on, I would note a strong growth trend in our new orders. The January to June period shows an increase of 18% year-on-year in the value of projects secured. These new orders include several important high-tech, energy transition, and sustainable infrastructure projects, some of which I will highlight in a moment. And as I said, the group's order backlog ended June 2024 at a record level of close to 66 billion euros, up 14% on a comparable basis. In terms of the performance of our segments, let me just mention some of the key highlights. On sales of over 8.6 billion euros, up 14%, Turner achieved an operational PBT of almost 246 million. 247. This level of profits represents a very impressive increase of almost 40% year-on-year, or 69 million euros in absolute terms. The operational PVT margin expanded markedly from 2.3% a year ago to 2.9% for the first half in 2024. And during the second quarter, Turner achieved a 3% margin. Margin expansion is being driven by Turner's successful strategy on advanced technology project opportunities and source blue supply chain service solutions. Outstanding cash flow generation has been a feature of our construction management business for many years. As you can see here, the first half of 2024 is no exception, with cash flow metrics showing increases of around 100 million year on year. Looking forward, for 2024, we anticipate continued growth in operational PVT to €460 to €510 million. At CIMIC, operational PVT of €193 million was up 6% on a comparable basis and consistent with 2024 full-year guidance. Operational net profit increased by 13% to €126 million, a nominal Net profit reached $272 million and includes a one-off non-cash gain of $146 million net of provisions. Net operating cash flow reflects Q1 seasonality and structural changes in the working capital profile that aligns with our lower risk, collaborative and tracking model. New orders of $6.1 billion were 4% higher year-on-year with a robust order backlog 24.6 billion, up 6%. Our 2024 guidance for CIMIC is for an operational PVT of between 420 and 460 million euros. At our engineering and construction segment, sales increased by 13% year-on-year to 1.8 billion euros. Operational PVT was stable at 39 million, with firm margins and the net cash position strongly increased by over 100 million year-on-year, driven by good cash flow generation last 12 months. Net operating cash flow in the first half of 2024 is driven by seasonal working capital variations. The engineering and construction order backlog of $11.3 billion was up 10% year-on-year, with new orders of $2.1 billion solid at over one time's work, The first half 2023 figures contain two major project wins in Europe worth over 1 billion. Our segment guidance is for operational PVT of 80 to 95 million euros. And Alberta's average daily traffic was up by almost 1% in 2024, with operating revenues and EBITDA up 60% year-on-year on a comparable basis. Net profit pre-PPA amounts to $402 million, up 1% year-on-year. The Abertis profit contribution to HoCTIF after PPA amounts to $39 million. For 2024, we expect Abertis will make a similar profit contribution to last year. Let me update you on the significant progress we have made in delivering on our strategy, which, as I have highlighted on previous occasions, is centered on three key pillars. Firstly, reducing the group's risk profile, which we are achieving by the greater use of collaborative style contracts, resulting in an order book where over 85% is comprised of lower risk projects. Secondly, expanding our already strong presence in the strategic high growth areas, which demand a more sophisticated value proposition and which are driving higher margins. In parallel, we continue to consolidate our core market position. The third cornerstone of our strategy is centered on a very disciplined capital allocation approach, which will generate significant long-term value for Hofti. As part of our capital allocation focus, we have also been carefully studying strategic money opportunities that could potentially further accelerate our growth ambitions, and we have just announced the strategically significant acquisition in Europe. Dornan has today 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. Headquartered in Ireland, Dornan is a leading mechanical and electrical engineering company in Europe. and works in the data center, biopharma, life science, industrial, and other sectors. With a strong presence in the UK, Ireland, Germany, the Netherlands, Denmark, Switzerland, amongst others, the business is expected to achieve revenues of around €700 million in 2024 and EBITDA of around €55 million, implying an acquisition multiple of approximately 7.2 times. Revenue growth has averaged over 20% in recent years, backed by an expanding order book, which currently stands at close to 1.1 billion euros. Dornan has a similar business model and risk approach to Dornan, and also serves many of the direct relationships with blue chips and hyperscalers. This is why the acquisition of a company with over 1,000 employees will allow us to further leverage He has strong engineering capabilities in the areas of design, engineering, project management, commissioning, procurement, and modularization. The current shareholders are part of the key management team and will all stay in their current positions post-transaction. The acquisition will be executed by Turner and will accelerate the company's strategy of expanding into the European market. Another important step in our group's strategy was taken at the end of April when CIMIC announced it had entered into an agreement with Elliot to acquire an additional 10% equity interest in this. The acquisition for a purchase price of 320 million Australian increased the group's ownership of this to 60%. As a consequence, Octif has fully consolidated this for two months during the second quarter. Following this transaction, the put option for the remaining 40% is exercisable between April 2025 and December 2026. Another important allocation of capital occurred in early 2024 when the shareholders of Abertis contributed $1.3 billion in equity to support the financing of the transactions announced in 2023 and the company's growth strategy. Octave subscribed its 20% share with a $260 million investment. Our capital allocation strategy is also focused on carrying out vault and acquisitions to enhance and expand our engineering, digital, and logistics services know-how and client offering. During the first half of 2024, semi-company Setsman acquired Prudential Engineering, expanding its presence in the growing chemical and energy industries which support the energy transition globally. The acquisition enhances Setsman's existing critical mineral and mineral processing expertise in copper, high purity alumina, vanadium, lithium, cobalt, rare earth, uranium, and nickel. Setsman also announced the acquisition of Minsol Engineering, which has experience that has been integral to the development of the global lithium industry for more than 15 years. Its expertise is Complements Setsman's brine lithium processing capabilities acquired with NovaPro in 2023 and will enable it to provide its clients with complete solutions in mineral processing for the global energy transition. These acquisitions complete Setsman's strategy to become a full-service global provider in extraction and refining of minerals, essential to rapidly growing clean energy technology. This has signed a shared purchase agreement to acquire Underground Metals Business Fiber, one of the largest underground hard rock mining contractors in Australia, with a strong position in critical minerals and metals, including copper, gold, zinc, and iron ore. This also acquired engineering firm Mintrix, which was founded in Western Australia in 1984, and has since built a strong reputation in engineering consulting, product management, and asset management in the mining sector. During the period, the group also advanced in its equity investment strategy in the areas of PEPs, with 100 million of previously committed equity paid in the Pacific partnerships with existing assets, mainly for the Cross River Rail PEP project. In the UK, Octi was awarded a multi-million European contract to design, build, finance, and operate a new student village for Staffordshire University in the UK. Regarding our sustainable edge data center developments in Germany, the first data center will be completed next year, and two additional plots have already been secured, with a further three sites expected to be acquired by the end of the year, and additional locations are in the pipeline for 2021. In May 2024, we have signed an extension to our collaboration with infrastructure fund Palladio for 5 to 15 data centers. As I mentioned earlier, Hoctiva achieved a strong increase in new orders during the first half of 2024, which were 18% higher year-on-year, including several projects secured in high-growth areas. In parallel, the group continues to perform well in the civil works and building markets. where we have a strong presence stretching back several decades. Let me run through some of the key projects secured during the first half of 2024. The group has successfully positioned itself in a rapidly expanding global digital infrastructure market. Turner continues to grow its strong position in North American data center market with new orders of 3.9 billion US dollars booked during the first six months of the year. which already substantially exceeds the total for 2023 of 2.6 billion. The period end backlog of 6.1 billion is up by over 70% since the beginning of the year. Work secured during the period includes a contract to build a data center for Meta in Indiana worth more than 800 million US dollars. Turner is in a very strong position to deliver on a very robust project pipeline from our existing hyperscale and key collocation client. A recent market trend is the advent of massive megadata centers 1 to 1.5 gigawatts to meet artificial intelligence and machine learning demand. Turner is uniquely positioned to gain market share based on its supply chain expertise, financial strength, and nationwide network of key trade partners in North America. Furthermore, Dorna has identified a pipeline of advanced tech projects worth around 20 billion in Europe, which complements the strategic acquisition of Dorna and lays the foundation for the company's expansion in the European market. In India, Lightning Asia has won the data center project for a multinational technology group, where construction work has just started and will be completed at the end of 2024. Five, the joint venture follows several data centers data centers that the company has completed or is delivering across the Asia-Pacific region in Hong Kong, Malaysia, Indonesia, Macau, and the Philippines. In Australia, UGL's rail and technology systems capability is supporting some of the country's biggest infrastructure projects, including Sydney Metro, Melbourne's North East Link, and Perth Metro Net Rail service. In June, the company announced it had been awarded a three-year contract to deliver business fiber products for the National Broadband Network in the states of Queensland and Victoria. The group is also active in the digital infrastructure market in Germany, winning a contract for a semiconductor-related construction facility using clean room technology, and is also involved in a project to use artificial intelligence to drive improved maintenance of local transport infrastructure. Furthermore, we're also working in Malaysia via Turner, providing construction management service for a large semiconductor project that at this stage is confidential. Octiv is supporting the build out of infrastructure for the global energy transition. In Australia, CEMEX UGL is playing a central role in the delivery of the country's environmental ambitions through the construction and connection of renewable energy assets, as well as via the design, construction, and connection of the high-voltage electricity infrastructure to connect those renewable assets to the national aquifer. In May, the company was awarded a contract by long-standing client EON to construct and install the 341 megawatts coal battery states in Western Australia. project builds on the 219-megawatt Stage 1 facility currently being installed by UGL, which is on track to commence operations at the end of the year. Our company, Pacific, has acquired development rights for the 700-megawatt Agoura Solar Farm and associated large-scale battery energy storage system in East of Wales, which will be one of the largest solar farms in Australia. Pacific will develop, invest in, deliver, and operate the solar farm and the battery energy storage system on a 3,000-hectare site, with UGL carrying out the initial works, developing the project solution, and providing operational maintenance services upon completion. In Western Australia, SESBAN is supporting Rio Tinto to build a green iron research and development facility to assess a new ironmaking process, which relies on base on biomass-based metal and has the potential to reduce CO2 emissions by up to 95% compared to traditional blast furnace iron making. The group has a strong presence also in the social infrastructure sector. In the first half of 2024, Turner began construction work for $900 million hospital expansion in Pennsylvania and was selected for a behavioral health hospital in Massachusetts. Turner was again ranked as the number one U.S. construction management firm in the hospital facilities sector for 2023. In Australia, the CIMI groups have seriously secured the contract to deliver the new Notre Dame College in Queensland on behalf of Brisbane Catholic Education. It will deliver five state-of-the-art buildings, among them an administration building, various learning spaces, sports courts, a workshop, and landscaping. And in defense, CPE was awarded a $770 million Royal Australian Air Force Base project in Queensland. Works will include the upgrade or rebuild of infrastructure and facilities. As noted earlier, in April, we increased our ownership in TIS, a well-performing business underpinned by long-term low-risk contracts and stable cash flows. During the second quarter of 2024, TIS was awarded a six-year contract extension worth $1.9 billion, OSI, with BHP for the Mount Arthur South Operations in New South Wales, Australia. This will continue to provide mining services at the site, operating and maintaining mining equipment to support BHP's production requirements, and working with the client and the local community towards the planned rehabilitation and mine closure. Last week, this was awarded a $205 million Canadian three-year full-service mining contract in Ontario. The site was last mined in 2017 and is ramping back up in response to the world's increasing demand for critical minerals needed to transition to zero emissions. The work will help Canada's nickel and copper industry to provide metals that are vital to North America's transition to clean energy. And let me finish this section by referencing logistics and supply chain services, which are becoming even more critical for the markets in which we operate. Turner Subsea Resource Blue streamlines the construction supply chain process and helps clients overcome supply chain challenges through strategic vendor relationships. The company, which was established in 2001, has expanded its service offerings over time and is expected to provide clients with over 1 billion US dollars in materials and products in 2024. In April, the company announced its plans to expand its services offering globally and enabling a client with new markets, providing the highest level of service. ESG remains a priority for the group. In 2023, Octave was again listed in the Dow Jones Sustainability Index for the 18th year in a row. Octave achieved top positions in the ranking compiled by S&P Global. Octave also improved the rating regarding important environmental and social issues, such as biodiversity and water management, as well as occupational safety and human rights. Looking forward, Octave's objectives are to continue generating sustainable cashback profits, achieve attractive shareholder remuneration, and create value for all stakeholders. The first half of 2024 shows a solid profit performance supported by a strong cash flow, further substantial new order growth leading to a record order book, and we have made great strides in delivering on a group strategy with the acquisition of Drona, which is a key milestone for the group's development. On change guidance for 2024, is to achieve an operational net profit of between 560 to 610 million, which represents an increase of up to 10% compared with last year. Let me stop there, and I would welcome any questions.

The first question comes from Graham Hunt from Jefferies. Please go ahead.

Good afternoon, gentlemen. Thank you very much for the questions. I'll just ask two, both on guidance. First, you're tracking above the top end of your four-year guidance in the first half. Is there a specific headwind you're considering for a slowdown in the second, or is it just a conservative approach you're taking? I'll stop there and wait for the second.

So regarding the guidance, listen, I think we have a first half, a very good first half of the year. But at this stage, we prefer not to change the guidance. We prefer to wait for the second half and be cautious.

Maybe then can I ask specifically on Turner, did you consider updating the margin target for this year and then 2026, given the performance and also potential accretion, I suppose, from the consolidation of Dornan, which should be a boost to that 3.5% by 2026?

I mean, again, I mean, Turner certainly is improving. They have very first, I mean, very good first half of the year. And certainly is continued expansion in advance. technology projects. In fact, I mean, you saw in my speech that they were able to secure a lot of the first projects in the semiconductor space, which adds to the battery fabs, to the recycling, to the biopharma, adds to the data center strategy, which all of that is very positive. SourceBlue, with higher margins, continues to expand. which is very positive as well. The acquisition of Dornan is very good because Dornan EBITDA runs at 8% because it's mainly advanced technology, which margins, even they are low risk, margins are higher. So that will help this in their path to continue increasing the margins. And in Europe, we have identified, just with the new pipeline, identified under the new strategy, there's 21 billion of projects that Turner are going to pursue, all of them advanced technology. So, I mean, certainly we are very optimistic about Turner, very optimistic. But at this stage, if we want to be cautious, we prefer not to change the guidance.

Thank you.

And the next question comes from Victor Acitores from Bernstein. Please go ahead.

Hi. Good afternoon. Thank you for your time. I have several questions. The first one is that on the net profits and dividends, we have seen a one-off positive on net profits in my understanding. I try to remember what happened in the one-off negative in Chile two years ago. The dividend was impacted. Now that you have one of positive in CIMIC, we can interpret that the 65% payout ratio is going to be applied again on the declared net profits. This is the first question. The second one on Dornan, what is the net cash of that company? And what is the expectations? about the margins of Dorna once they integrate on the profile of TARNER. And I try to understand what you mentioned, that you do know about how to do things in TARNER, probably the chance in order to improve metrics of Dorna is only to analyze what could be the long-term perception of that one. And I have also a third question regarding the put and call options on TS, on Elliot. You clearly mentioned that it's between April 2025 to December 2026. But I think that probably, I don't know if it could be an open window if you reach an agreement with Elliot, the chance to do transaction before that time. Is something that is possible in agreement? Or if not, thank you so much, Juan.

Thank you, Victor. So starting with the net, with the dividends, we give, I mean, our payout ratio is over underlying business, right? So in that sense, I mean, it's true that we have recognized a gain because of the market value of CIMIC's existing 50% stake. As required, and obviously this is a non-cash nature. So because it's non-cash nature, the net positive effect of the $146 million this year will not be taken into account for dividend payout in terms of the 65%. In terms of the net cash of Dornan, yes, it's a positive net cash. I don't recall the number right now, but it's around the 80 million in net cash. And then regarding Elliot, as I always say, we're open for that. We don't know at this stage the intentions of Elliot, if they will wait, if they will exercise before, but certainly we would be more than open for accelerating that transaction. And Victor, I'm not sure if there was any other question that I have missed.

No, it's only one thing, Juan, is that regarding Dorna, that is probably one of the main elements of the results today. What is the outlook of Dorna? Because I think that you have the chance for Dorna in order to isolate, to continue growing, but once you integrate through the Tanner skills and know-how, probably you have the chance to boost the margins more further. I don't know if this is one element that could be taken into account or is possible in some years? What are your thoughts on Dorna integration, on your structure and the way of gains that you can obtain on that integration?

So starting with Dorna in the past, before the integration, Dorna revenues in 2021, the margins have been very stable. But in 2021, the revenues were around 365. And now in 2024, which is three years later, we're talking about 700 million. So that gives you a sense of how much it's growing. But at the same time, by having Dornan inside Turner, it's a win-win, right? And that's pretty much emphasizes what you're saying. We'll be able to generate a lot of growth synergies for Dornan and for Turner. So Turner on one side is going to gain local design, engineering, trade management expertise in Europe, a lot of existing client relationships in Europe, A lot of these clients are well known by Turner because Turner works with them in the US. And as I said before, there's a project pipeline of opportunities in excess of the 20 billion that, right? Which is quite significant. And all that pipeline is identified, is very specific, are projects that we are currently pursuing And we have already started working with Dornan team on a few of those. On the other side, Dornan is also going to benefit from the, I mean, Dornan's strong client relationships and experience working with them. It's going to get the benefit of source blue in terms of all the procurement and the global network of supply chain of Turner. It's going to get efficiency from the systems. It's going to get efficiency from a lot of the capability and volume for project management, which is going to allow Dornan to move from what is relatively medium and small projects into large and very large complex projects, right? So Dornan, yes, right now has a big part in data centers and has a lot of expertise in industrial assets, in biopharma, in mechanolec in general. So by having that expertise in the mechanolec space and taking the power of Turner, yes, we believe that we can grow Dornan, that we can increase margins in the future, and that we can capture a lot of the opportunities that we are going to see in Europe. And we are very, very happy with the transaction.

Thank you.

And the next question comes from Dario Maglione from BNB Paribas Exxon. Please go ahead.

Hi, good afternoon. Just a couple of technical questions for me. and how much did this contribute to operating cash flow in q2 and also can you comment on factoring in h1 and what we should expect going forward thanks

Okay, so starting with the cash flow, I don't have that number in front of me because I don't think we're disclosing, but I'm looking at my papers. I don't have that detail. In the case of the factoring, I mean, the factoring, I mean, we had an increase in the factoring volume of 205 million euros year on year. And this is basically due to the increase in volume of the North American business of revenues. And there has been also some volume up in CIMIC. There's a small contribution from this, but basically some increase in CIMIC. So those are the two main drivers. But probably that will be unwound. moving forward, right? It's more of the revenues that we're having. We will try to keep the factoring levels stable.

Thank you. Thank you, Juan.

And the next question comes from from Bank of America. Please go ahead.

Yes. Good afternoon. Thank you for taking my questions. I had a couple. Firstly, it's on the balance sheet. How do you see the firepower of Hochtief right now for further acquisitions, perhaps to further increase your stake in Peace over time, for further equity investments in new projects, and what sort of leverage metrics you are monitoring to determine the balance sheet for your power. If you could share a bit of color on that, that would be very helpful. And question number two, do you see more opportunities to do acquisitions similar to the one you have just announced? Is it just a unique transaction or it is like opening a new chapter with Hoxha being more acquisitive going forward? Thank you.

Okay, so in terms of firepower, I mean, it's true that this transaction is adding 1.1 billion of net debt, but it's also adding on a full year basis almost the same amount in EBITDA. So in general, nothing has changed from where we were. It's true as well that we have been doing all the Bolton acquisitions that I described, and we have also been contributing to Avertis, and we have been also contributing to the PVPs. that I did mention in the presentation, and we'll continue. So, where we see, well, we believe that we do have firepower, obviously, through additional debt, there's no doubt, and the rating agency right now has given us a very solid investment grade, which, as everyone knows, is our priority to keep and to manage all our capital allocation uh with the priority of keeping the investment great and right now it's very robust and solid so so we're looking we're looking at that and so where is our firepower first the strong gas flow that we generate every year and it's allowing i mean if you were to remove the digital transaction, look at all the acquisitions and liberties just through the cash flow without increasing the debt, right? The cash flow would have increased 736 million if it was not for all these acquisitions, right? So every year we're going to have that capacity to increase and to invest in different projects and different transactions and different capital, right? And so that's without even increasing the debt. So we have the two components, our cash flows and debt. So where do we want to drive that investment? At this stage, we are not, I mean, we want to make sure that we continue investing in the right projects. We will invest in Bolton acquisitions or companies if we see that there's an opportunity. But, I mean, we're quite comfortable having this now in Europe. I believe that right now there's nothing, I mean, there's nothing that we cannot run in terms of infrastructure. We do have the full critical metals capability with all what I explained on Sedgeman, full mining capabilities underground, OpenCAD through all the minerals through this. We do have expertise from batteries, fabs, I mean semiconductors, fabs, recycling, data centers, sports facilities, biopharma, biotechnology through Turner. We do have industrial and energy capability through UGL, Light and AC, and HoCTIV. And we do have the nuclear engineering, which is one of the largest valves of plant engineering globally through HoCTIV nuclear engineering. So we're very, very comfortable where we are in terms of our diverse, in terms of our ability to build all the global infrastructure and what's coming in the future so so that's um so that's number one so where are we going to start investing as the third pillar of our strategy you remember the first one was making sure that we were reducing risk they were cleaning balance sheet that we were making sure that all our new jobs were collaborative or epcms were open book basis alliances, et cetera, which were teaming. The second part of our strategy was to make sure that we were building all that engineering capability and all the ability to work on all these new projects, first in the global knowledge, but also geographically. And we have achieved that. Now we have ability in America, in Europe, and Asia Pacific, including Australia, through all the verticals that I mentioned. So that's done. So now we're going to start investing the equity in assets. So that ability that I explained before with our operational cash flow plus the debt, we are going to apply to starting projects. You saw the PEPs that we have invested so far, right? Last year it was we won the electric vehicle chargers. This year we have on the social infrastructure. We continue developing all the renewables battery storage facilities in Australia. We are in the data center space with 15 data centers identified in Europe, and that's going to increase significantly in 2025. And we have identified opportunities in other energy areas. So we are going to start growing in traditional PPs, energy PPs, and developing projects, and all the new assets that are coming. And that's what we would like to focus. If there's an opportunity to buy another corporation, because there's any expertise that we believe we're missing, we will, certainly, because things evolve very, very fast. And we want to make sure that we are up to speed on all the technologies. But certainly, I mean, we are in a good position and we want to start investing in assets. Of course, I mean, continue giving that unattractive shareholder remuneration. That's as we always do.

Thank you so much.

And the next question comes from Marco Limite from Barclays. Please go ahead.

Hi, good afternoon. I've got just one question left. I think in the past you have provided a soft guidance of free cash flow conversion ratio versus, let's say, the net income to normalize back to around 100% in 2024. Is there any reason why you now are a bit more positive on the conversion ratio and you think you can exceed 100%? Thank you.

So, I mean, we don't provide, or I don't think we have never provided guidance from a legal perspective in the free cash flow. Our objective is always meeting the 100% conversion, right? That's where we work. And a big part of the risking strategy of new projects coming in the future is to make sure that we are able to achieve that 100% without volatility, right? Because when you get into the old-fashioned construction projects, there were two factors contributing to the cash flow volatility. One was big advance payments at the beginning, which you need to fill by the end, and then the risk that sometimes overruns or were pretty much driving overruns on the project. So that's why Even our objective has always been the 100%. We haven't achieved, and some years very good, some years bad. Now we're trying to change that by having more stable gas flows looking forward. But we haven't, we're trying not to give legal guidance in that sense.

Thank you.

And the next question comes from Augustin Zendre from Stiefel. Please go ahead.

Good afternoon, gentlemen, and thank you for taking my questions. I've got a couple of questions left on Dornan. Actually, my first one, apologies if it was already asked. When do you expect to close that deal and to consolidate it into your business? My second question is on the company growth, on the Dornan growth. Wondering whether this is purely organic, that growth rate that we've seen over the last few years, or whether there is any bolt-on in that business. and whether its business model relies on bolt-on acquisitions. And finally, still on Dornan, I would like to understand how the labor environment is for the company. Are you seeing in the business model any constraints like we see for energy services businesses? Thank you.

Okay, so the growth of Dornan has been organic over the years. It's not a combination of companies. It's always been organic. In terms of the labor market, One of the strengths, in my opinion, from Turner business, right, because Turner has more than 1,000 employees, but Turner is one of the abilities of Turner is pretty much being able to capture, bring talent into the business, keeping talent, retaining, and then growing. Especially because it has a very professional and a very good training program from its people. They have a lot of workshops and it's one of the keys in the success of Turner all the years. This year we have brought more than 5,000 people or new engineers into the company, which is a similar number than what we got last year. So we are being able to consistently bring new people into the business. We do have one program that we're going to, that we've been already working on it for the last couple of years, but we're going to launch formally, which is a Hocktee University with different levels. And essentially it has three levels. One is undergraduate. The second one is post-graduation. And the third one is with our own people. And the idea is to do that. So I'll give you an example. You see that Light in Asia is building a lot of the, I mean, we keep announcing data centers in the Adelaide test. We have announced in Indonesia, we have announced in Hong Kong, Philippines, and Singapore. We continue growing the data center footprint in Asia Pacific. A lot of the people that were able to recruit and to bring into those data centers have all gone from our new university, which takes them, in this case, to the U.S., which we have special courses, special training. They go through all our data center facilities in the U.S., and then we send to AC Pacific. And we have already been doing that for what's coming, even without Dornan, for the projects in Europe, and not just data centers, battery fabs, recycling fabs, hydrogen, semiconductors, et cetera. We're doing exactly the same thing. We have already a lot of people being sent into the use for those facilities. In the case of energy, transmission lines, photovoltaic wind, et cetera, Australia. In the case of critical minerals, Australia and Canada. In the case of civil, it's pretty much very local. That's the most – we are doing what we're being able to do because of this strategy. I mean, this is the underlying – if you have to ask us what's the most important thing that we're doing right now to implement and to deliver on our strategy is what I'm explaining right now. That's the key to being successful. And that's the key why a lot of the clients in a lot of these large projects, they are pretty much giving us – giving us the opportunity. So in the case of Dornan, I believe that they will start benefiting from this. I think that that's one of the biggest values that Turner is going to give to Dornan, the ability to grow significantly. And that's an opportunity that Turner is bringing to Dornan. And then what is going to happen, that will be within the coming months. There is obviously the European Union merger control regulations and approval. So, I mean, as soon as we get that, we will proceed with the closing. But I cannot anticipate a specific timing.

Thank you very much.

And the next question comes from Luis Prieto from Kepler Shuffle. Please go ahead.

Good afternoon, Juan. Thanks a lot for taking my questions. I have joined the call late, so I strongly apologize if any of my questions have been asked. If so, please ignore and go to the next one. I have three quick questions. The first one is I'm surprised by the margin difference between Thorne and Turner. If you could explain why that is, given that you say that you have the same risk profile and the same approach to life in general, why are the margins higher? The other one is in this context of higher margins and in the context also of the debate around how do we value these things, the predominant voice has been that it should be double digit EV but duh. So my question is, if this is so similar to Turner, why so cheap in terms of multiple? And finally, if you can shed any color on why the guidance hasn't been moved. Are you keeping some firepower towards the second half of the year, or you really think that this is the range where you're going to be coming at at the end of 2024? Thanks.

Okay, so a few things in that sense.

First one, margin difference between Dorna and Turner. So, well, Turner has advanced technology, general building, stadiums, hospitals, residential. commercial, everything that is advanced technology, margins are about the 8% gross margin, about eight double digits. So that's one of the reasons why we're so focused on acquiring all engineering systems, people, data, run into more with the same risk profile at higher margins, right? In the case of Dornan, everything they do is advanced technology. It's a high specialized contract, okay? Turner, they do a lot of construction management. When you do construction management, not everything on the job has the same market, right? Dornan goes, it's a specialized contractor, right? So in engineering. So I think that that combination is very powerful because we're going to be able to do more complex projects. It will allow Dornan to grow, but at the same time, Turner will be able to increase its margins, okay? So that's on that. how to value these things. Dornan is an opportunity because, I mean, it can grow significantly with us and can grow into a lot of projects. And we are talking to them about, I said during the presentation and some of the good news that all the work we're doing now in the semiconductors fab space, which are very, proud of, and we are working now in Malaysia, and I believe that we're going to be continuing giving good news in that space. And we have been focusing for two years to try to get to that level. And he's going to be able to provide that to Dornan. We are also working in a lot of the nuclear areas through a combination of the Hocktief Engineering and Dornan. We're also being able to work in a lot of the mega battery fabs and mega projects, including data centers, etc. That type of big, large EPCM contractor, right? That level of Jacobs, of Bechtel, of Turner, of, I mean, those are the ones that typically are valued in those high digits. And why? Because it's not just a specialized contractor or doing a specialized job at one given time. You start from the very beginning. You do all the construction management and you stay there. You stay there for the asset management, for the CAPEX, because you have the supply chain. SourceBlue, which is the Turner centralized supply chain area, has gone from 100 plus million almost yesterday to more than a billion in 2020. that all of that is the strategy of becoming a large EPCM contractor, long-term asset management with all that supply chain of the equipment, not just during the construction period, but during the maintenance, right? And that's, it's a different type of company. Dornan is going to become that by bringing that into Dornan. And Dornan is going to acquire that European expertise to be able to continue growing, right? So, but that's the difference between acquiring an engineering firm or a local between acquiring a Vector or Jacobs, right? I mean, Why can't you buy an engineering company, a small engineering company in Ireland tomorrow at certain multiple, but try to buy Jacobs and you need to pay 14 times? Because it's a different thing, right? It's not just size. It's what brings the size to a lot of the projects, the clients, et cetera. So anyway, that's my view. Then, in terms of the guideline, I said that before, we had very good first half of the year, right? And we are very comfortable with how things are going. We see a lot of potential in certain areas of the business. I spoke a lot about Turner and all what Turner is doing and the 20-something billion of opportunities in Europe and the semiconductor fabs and how Turner is evolving. We're very comfortable. But we're also very comfortable with Setsman. I mean, Setsman, with all the acquisitions that we've been doing with Setsman, right now we are a world leader. in copper, in alumina, in vanadium, lithium, cobalt, earth, uranium, nickel. And we are starting to compete with the large firms in many of the projects. I mean, we won a first small phase that hasn't been announced yet in Germany because we are waiting for financial close. But if financial close happens, we will get into trouble probably one of the largest lithium projects in Germany. We won the fifth lithium projects in Portugal. We have one in Canada that I mentioned before. We have one in Australia, but also that's in lithium, but also in the other critical metals. We do have a lot of potential as well in the critical metals sector. Battery fabs, things have slowed down significantly in the battery sector. space but basically it's on hold because of the demand of electric vehicles but it's only a pause i mean just where we see ourselves and and the conversations with the clients that will be pretty much ramping up eventually sometime in 2020 right it's just a pause but but the price haven't been canceled it just delayed trying to forecast the demand. So there's a lot of potential there. Having said that, one thing that we're comfortable and we're optimistic, different thing is that we want to change the legal guidance. We prefer to keep what we have reported to the market.

Super clear. Thanks.

Ladies and gentlemen, as a reminder, anyone who wishes to ask a question may press star followed by one at this time. And we have one more question coming from Nicolas Mora from Morgan Stanley. Please go ahead.

Yes, good afternoon, gentlemen. Just to pick one on Turner and the data center, how looking at the run rate of all the wins year to date, you seem optimistic. very much on track to hit what i think what the ceo of turner said that your capital market day kind of a 5 billion run rate of revenues in data center can you first can you confirm that for for the year and then second you you want a uh very large hospital project in hong kong in the second quarter does it mean you you back in hong kong potentially winning more works at at simic and helping to to turn around the cash generation and the margins there and that that would be it

Thank you, Nicolas. So starting with Turner, yes, I mean, certainly we are on track. The backlog revenue in the first half of 2024 was in just data centers. For Turner, 6.1 billion. We had new orders in the first half for another 4 billion. That's an increase year on year of 344%, 344% just in data centers. versus previous year. So we expect that the U.S. market is going to grow 56% from the current $82 billion market per year to approximately $128 billion by 2029. And that will be a consistent growth. And that's just in the U.S. We have identified in Europe, just in data centers, $18 billion worth of projects that we're pursuing. And that's Turner, right? So yes, we're on track. And yes, we believe that this is a market that will continue growing, right? And several to Turner, we have Light in Asia, which they've won, as I said before, projects in India, in Hong Kong, in Philippines, in Indonesia. I mean, in Singapore, they keep doing data centers with a lot of the large hyperscalers with collocation, clients, et cetera, right? So there's a market. And we have already identified projects in Australia. and in South America that we're going to be pursuing. So the data center market in particular, it's a market that will continue growing. And we're also looking to the opportunity at ACS Hockney level in partnership, potentially, to invest in equity in a lot of these projects. And we're putting a series of platforms together for this effort. So we are very bullish on that. In Hong Kong, you saw the award of the hospital in Hong Kong. And that's a big milestone for us. Because in Hong Kong, we continued operating with private sector, but we were not forgiven or we were not welcomed by the government until now. And the hospital is a big milestone because now it seems that, I mean, it's the proof that the government has, I mean, it's allowing us to, it's allowing us to continue working in Hong Kong. And right now we are able to continue tendering. We're able to continue working in the new project. So yes, I think I like the ACIEs. I mean, there's a breaking point right now for Latin Asia.

And if I may just on the, because I think now the opportunity in US data center is a bit clear. All the contracts you've won so far, especially over the past six, nine months in Latin Asia, how big does it add up to for now in terms of, I mean, dollar amount or so, just forced to get an idea of commercial contracts, and no, you don't provide any figures.

I mean, the hospital is significant. The hospital, I think we did announce, I don't have the number in front of me, but we did announce in the last, in the marketing, it was in excess of 2 billion, or so, right? The hospital, 2 billion. And then, In the case of the data centers in Asia, they're not that big so far. I mean, it's the same thing that happened in the US at the beginning. We're talking about 40 megawatts, 50 megawatts, 20 megawatts. And then if you look at what Turner is doing in the US, 700 megawatts, 800 megawatts. I mean, Asia Pacific is still in their first small projects. They haven't got yet into, at least with us, right? into that.

But we're expecting to grow that over time.

So there are no further questions at this time. And I would like to turn the conference back over to Mike Pinkney for any closing remarks.

Thanks very much, everyone. I hope everyone has a great summer. Thanks for listening. Juan.

Yes. Thank you so much, everyone. I hope you all have a nice summer vacation if you're going to take one. I look forward to seeing you very soon. And thank you so much for your time today.