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.