Hochtief Ag

Good afternoon to everyone, and thank you for joining this HawkTeeth 2024 results call. I'm Mike Pinckney, Head of Capital Market Strategy, and I'm here with our CEO, Juan Santamaria, and our CFO, Peter Sassenfeld, as well as our Head of IR, Tobias Loskamp, and other colleagues from the Senior Management Team of HawkTeeth. We're looking forward to taking your questions, but to kick off, our CEO will run us through the details of this strong set of numbers and provide you with an update on our group strategy. Juan, all yours.

Thank you, Mike and Adim, and welcome to everyone joining us for this results call. Our growth strategy has delivered a very successful 2024 octave and will drive further growth in 2025 and beyond. we have consolidated leading positions in our strategic markets where growth is being driven by an unprecedented ramp-up in infrastructure investments by our public and private clients. We're deploying our geographic footprint to access this growth in all our regions, and we're expanding our presence in the value chains of these markets to enhance growth. This growth trajectory is supported by a solid balance sheet, a strong order book, and a strongly cash generative business. Turning to the numbers, a group delivers substantially higher sales and profits backed by another strong performance in cash flow generation. Group sales increased by 20% to 33.3 billion euros in nominal terms, accompanied by solid operating margins. Adjusting for the impact of acquisitions and divestments, sales growth was over 10% on a comparable basis. Octiv's operational net profit rose by 13% to €625 million in 2024, exceeding the top end of the guidance range of €560 to €610 million we provided to you at the beginning of the year. Nominal net profit of €776 million included a net €147 million one-off gain at our Australian company Simic & Campers, with €523 million reported for 2023. The quality for profit performance is underlined by Hochtief's outstanding cash generation during the year. Cash flow from operating activities in 2024 was over 600 million higher year-on-year at 2.1 billion euros, an increase of 100 million year-on-year on a comparable basis and reflecting a high and sustained level of cash conversions. Octave ended the year with a slightly net debt position of €120 million, adjusting for the impact of its strategic investments carried out in 2024, which I will describe later. We would have had a net cash position of €1.6 billion. Even after taking into account the €331 million dividend paid out to shareholders in July 2024. The group's order book ended the year at 67.6 billion euros and is up by 7.8 billion, or 13% on a comparable basis versus December 23. As a consequence of our strategy to further improve the group's risk profile, lower risk contracts, which incorporate enhanced risk sharing mechanisms, now account for well over 85% of our order book. As you will be aware, this proportion has risen substantially in recent years. The ongoing increase in our backlog reflects the strong growth recorded in new orders, which rose by 14% to 41.8 billion, equivalent to 1.2 times the work done during 2024. Around 50% of the new work we secured during the year relates to our growth markets. Let me reference a selection of some of our project announcements made during 2024 in these growth markets. At the end of the year, Turner, along with two partners, was awarded a contract with Meta to build a megadata center campus worth more than 10 billion US dollars in Louisiana, one of the largest projects ever announced in the sector. Pacific Partnerships acquired the development rights for the 700 megawatt Kogura Solar Farm and associated large-scale battery energy storage systems in New South Wales, which will be one of the largest in Australia. This was awarded an important three-year full-service mining contract in Ontario, which will help Canada's nickel and copper industry to provide critical metals that are vital to North America's economy. In Europe, Hochti won a contract for a semiconductor-related construction facility using clean room technology. And in Asia Pacific, Lighten Asia secured a 2.6 billion hospital expansion project in Hong Kong. HoCTIV has also delivered important projects in our key sectors, including transport infrastructure, education, airports, sports stadiums, and defense, where demand continues to show strong structural growth driven by megatrends and other related factors, such as increasing reorganization. In Europe, for example, the €1 billion Dutch A15 PEP highway project, where Hochtief Consortium is preferred bidder, got the go-ahead from local authorities. In the UK, Hochtief was awarded a multi-million euro PEP contract to design, build, finance, and operate a new student village for Staffordshire University, as well as 12-year transport infrastructure maintenance contract in Scotland, worth at least €190 million. In the U.S., a Turner joint venture is leading the $2.6 billion transformation at the San Francisco International Airport. Turner also maintains a leading position in sports stadiums and during the third quarter celebrated the opening of the $2 billion Intuit Dome with its joint venture partner and the Los Angeles Clippers. In defense, CP was awarded a $370 million Australian Air Force-based project in Queensland with works including the upgrade, rebuild of infrastructure facilities. Elsewhere, Abertis won an international tender in Chile for the expansion of the strategic transport link Santiago-Los Filos with a 30-year concession period. And now, let me take a moment to outline our performance at the segment level. In terms of order growth and indeed other metrics, Turner had a standout performance. On revenue growth of 19% to 19.3 billion euros, operational ability was 37% higher at 570 million euros and well above the top end of the guidance we had provided of 510 million euros. This outstanding rise in profits was partly a consequence of the 40 basis points margin increase at the PwT level to 3% during Vitorno's successful strategy of focusing on advanced technology projects, in particular data centers. And I would highlight that the net profit contribution of 414 million euros, a 41% increase year-on-year, represented 50% of Octave's group operational net profits. Turner's strategy is delivering very strong growth in new orders, resulting in a 30% increase in the company's backlog to a record €32 billion. That's a €7.3 billion jump during 2024. As a consequence, we anticipate Turner will continue its strong growth momentum through and by, firstly, its strong position in advanced tech, including the rapidly expanding data center market boosted by Doran in Europe. Secondly, further margin progression of the share of advanced tech projects steadily increases and aided by sources blue supply chain services offering. And thirdly, the structural long-term growth in several of its key markets, such as healthcare, education, airports, and sports stadiums. The growth strategy at Turner is delivering strong growth. Our guidance of €660 to €750 million operational PVT for Turner in 2025 points to an increase of between 16% and 32%. Moving on to CIMIC, I would highlight the solid underlying revenue with a strong growth in strategic market segments, particularly across the data center, social infrastructure, and energy transition markets. Our integrated solutions company delivered operational PVT of 450 million euros, up 6% on a comparable basis, towards the top end of the guidance range of 460 million euros. Operational impact was up by 8% at €263 million, with nominal impact of €410 million, including the net one-off gain of €147 million related to the decision position. CIMIC ended the year with a robust order backlog of €24 billion, up 3% year-on-year, effects adjusted. We expect further growth in the business in 2025 with an operational PBT guidance for CIMIC of 480 to 510 million. At our engineering and construction segment, sales increased by 10% year-on-year to 3.6 billion euros. Operational PBT showed a 7% increase to 88 million euros in line with the guidance range for the year with stable margins. The ANC order backlog of 11.6 billion euros was up a further 4% year-on-year after an exceptional 2023, when the order book jumped by 20%. 2024 new orders were solid at 4.4 billion, around one times the work done. Our ENC guidance range for operational PVT in 2025 of 85 to 95 million implies a strong growth of up to 24% on a comparable basis. Looking at Abertis, the toll road company continues to deliver on its growth strategy of investing in assets to extend its portfolio duration. Operating revenues rose 10% to over 6 billion euros and EBITDA also 10% higher at 4.3 billion euros. Operational net profit per PPA was around 800 million euros, a 4% increase with a nominal net profit figure incorporating the impact of the early termination of the Texas toll road. The operational result of 81 million euros was in line with expectations. As a consequence of the solid cash flow performance, we expect Abertis to distribute a total dividend of 600 million euros in the second quarter of 2025 in line with the previous year. And we anticipate that Vertis will deliver a similar operational result in 2025 to the 81 million euros of 2024. I would like now to provide you with an update on our strategy in the context of an infrastructure sector, which is undergoing an unprecedented and multi-year transformation driven by digitalization, demographics, decarbonization, and deglobalization. Octiv has positioned itself as a leading advanced tech infrastructure and services solutions provider to meet the strongly rising demand, not just from a construction perspective, but also as an equity investor and operator. This is consistent with our role group objective to deliver an attractive level of shareholder remuneration and create long-term value by first, generating cashback profits whilst maintaining a low-risk profile. Second, further expanding our presence in strategy growth markets. And thirdly, by accelerating our equity investment in greenfield infrastructure projects accompanied by selective M&A. The efficient allocation of capital plays a key role in the strategic development of our company in terms of transformational M&A, both on acquisitions, the deployment of equity capital for next-generation infrastructure and PPP investments. During the year, Octif has executed several important M&A transactions which support our strategic growth ambitions and further consolidate our strong competitive positions in specific market segments. Torna announced the 400 million euros acquisition of Dorna Engineering, which was closed in January 25. This rapidly growing advanced tech engineering business headquartered in Ireland had an order book of 1.6 billion at the end of last year. The Dorna acquisition is a major milestone which will enable the group to accelerate its European expansion strategy, where it has currently identified potential project pipeline of over 20 billion euros. In July, HOCTIF and Dragados agreed to integrate their North American civil engineering businesses to create the second largest player in the region. The combined resources will support further growth in a rapidly expanding North American civil works market. This value accretive transaction, which was closed in January 25, results in HOCTIF holding a 38.2% equity consolidated stake in the new business. During the second quarter of 2024, another important step in our group's strategy was taken when CIMIC announced it had entered into an agreement to acquire an additional 10% equity interest in this. The acquisition for a purchase price of 195 million euros increased the group's ownership of the natural resources companies to 60%. And at the beginning of the year, the shareholders of Abertis contributed €1.3 billion in equity to support the company's growth strategy, with Hochtief subscribing its €260 million share for its 20% stake. Let me give you more color on our leading position in the data center market, where strong growth is expected to be sustained for several years driven by the rapid expansion of cloud computing and artificial intelligence. We have evolved HoCTIF's strategic position in the sector over several years. Beginning with the smaller facilities, we have developed our experience and capabilities in North America to enable us to deliver data center projects for the leading global hyperscalers, such as the Louisiana project I mentioned earlier. In addition, we have started to deploy equity. Looking forward, overall data center capacity predicted to show double-digit growth through to 2030, and hyperscaler capacity is expected to double in the same timeframe. So demand from these clients will likely grow faster than the world market. Octiv is leveraging its global data infrastructure capabilities to identify and harness this fatigue levers that enable data centers to be deployed at pace. At the same time, we're leveraging this know-how, our geographic footprint, our strong client relationships to enable us to address the strong demand growth in the Asia-Pacific region and Europe. In Asia-Pacific, we have been awarded several projects during 2024, worth in total 1.3 billion, including data center contracts in Malaysia, India, Melbourne, and we're delivering our competing work in Hong Kong, Indonesia, Macau, and the Philippines. In Europe, Turner is assessing an addressable pipeline of advanced tech projects worth over 20 billion euros, mainly in data centers, which complements this fatigue acquisition of Turner and lays the foundation for the company's expansion in the European market. And in North America, Turner continues to grow its leading position with its data center order backlog having almost doubled year-on-year to around 7 billion U.S. dollars. And I would highlight that this figure includes only a negligible contribution from the Louisiana project we announced in December. As a result, Octave overall data center order backlog at the end of 24 stood at around 8 billion euros. Over 13% of the group total, more than double the level of 22, and is set to grow significantly in the future, with additional momentum coming from the donor acquisition. Furthermore, we are now investing substantial amounts of equity in selected data center projects, thus providing HoCTIF an additional opportunity to create significant value in this sector going forward. In Australia, we're leveraging the group's capability and leadership position. And in 2024, we acquired a site to develop a data center with 200 megawatts capacity. And in Germany, we're expanding the framework agreement with our partner to 15 sustainable edge data centers. The first one will become operational this summer. At the same time, further potential expansions in Europe are under discussion. The strategic shift from building to also owning and operating data centers is consistent with the Group's strong track record in PEPs. Overall, at the end of 2024, we had committed equity investments of €800 million, of which about €400 million are in strategic growth markets, including data centers, renewables, battery energy storage systems, electric vehicles, charging networks, and critical metals. Looking further forward, HOCTIF is leveraging its project delivery track record, engineering experience, and market presence to position itself for additional potential growth opportunities which are emerging globally. Specifically, we've been developing our technical and engineering know-how in sectors which are critical for the global energy transition including lithium, EV charging, and clean energies, as well as in the other areas such as semiconductors. These optionalities enable HoCTIV to potentially benefit from additional significant longer-term growth opportunities. We continue to focus on creating sustainable value for all stakeholders, and HoCTIV remains focused on ESG. In accordance with the Sustainability Plan 2025, HoCTIV aims to be net zero by 2045, and accordingly, we have defined additional near-term reduction targets through 2030. Shareholder remuneration remains a priority for the group. As a consequence of Hochtief's strong profit increase during 2024, and taking into account the solid growth momentum, the proposed dividend for 2024 is 5.23 euros per share. This represents an outstanding 19% increase year-on-year, compared with 4.4 euros per share dividend for 2023, and is equivalent to a 65% payout on the operational net profit for the year. So let me wrap up. Octaves 2024 results show an excellent performance with a 13% increase in operational net profit, exceeding guidance, and backed by strong cash conversion. A record year end order book of almost 68 billion euros shows a comparable 13% rise in the last 12 months, with particularly significant increases in areas including data centers and healthcare projects, setting up the group for another strong year. And we're also delivering on the strategic shift towards investing equity in our growth markets and thus expanding our opportunities to create value in markets where we have leading positions. Octave's growth trajectory is a consequence of consistent effort and resources applied in a consistent direction, and they're pinned by our increasing adoption and development of digital and AI tools. We're harnessing our existing experience and capabilities across the group's activities and geographies, incorporating additional specialized engineering and systems know-how, and leveraging our competitive strengths. And we confidently look forward to sustained growth in the coming years. Our positive momentum is set to continue in 2025, where we expect to achieve an operational net profit of between 680 to 730 million euros, which represents an increase of up to 17% compared with last year. Thanks everyone for listening and happy now to take questions.

And the first question comes from Graham Hunt from Jefferies. Please go ahead.