Earnings Call: Q4 2018

Feb 28, 2019

Good morning, and thank you very much everyone, as usual, for joining us for this call of ACS's 2018 results. I am here, as you know. On my right, Mr. Marcelino Fernández Verdes, CEO, and on my left, Ángel García Altozano, who is corporate general manager. Of course, as usual, after the presentation, there will be a Q&A to answer any questions you may have. Let me start by giving you some of the most relevant highlights of 2018 for the group. First of all, I would like to underscore the excellent results of 2018, with net attributable profit at EUR 915 million, up 14.1%. Secondly, there has been very strong cash flow generation as a result of very positive trends in our operating businesses. Specifically, we have generated EUR 1.95 billion in gross cash flow from operations, which is 17.2% up versus last year. This operating cash flow has enabled us to fund the significant investments in the year and reduce group debt levels to a positive net cash position at year-end. We also have a growing backlog in our strategic markets, thanks to the major contract awards in the infrastructure and energy sectors we obtained in the year, as a result of the group's very solid competitive position. This excellent strategic position has been reinforced by our Abertis acquisition, leading global company in toll road management and infrastructures, enabling us to fully integrate the value chain as well as reinforcing our investment plan in infrastructure concession projects. Specifically, we have identified a potential range of PPP infrastructure projects for a total of over EUR 230 billion. I would also like to underscore the group's competitive strengths in the renewable energy sector, with 2,000 megawatts under operation or construction, as well as 10,000 megawatts in prospects, which we expect to develop in the coming years. Now let me sum up the trends in our main metrics in 2018. Our turnover was at EUR 36.66 billion. That is 5% up with respect to the previous year, 9.7% in like for like terms, that is adjusting for ForEx impact. This growth has been the result, to a large extent, of the excellent trend in all the group's businesses. Our backlog is at EUR 72.2 billion. That is 7.7% higher than in 2017, 8.6% if you adjust the ForEx impact because of the appreciation of the euro against all the other currencies. Our EBITDA was EUR 2.43 billion. That is 6.9% higher than the previous year, or 13% higher in like for like terms, with an EBITDA margin of 6.6%, which is 12 basis points higher than 2017. The EBIT was EUR 1.79 billion, which is 10.1% up, or 16.6% up in like for like terms. Net attributable profit for the group in 2018 was EUR 915 million. That is 14.1%, as I said before, 14.1% more than in 2017, and 18.8% if we adjust for the ForEx impact. Finally, our gross operating cash flow, that is before operating investments and variations in our working capital, was EUR 1.96 billion, which is 17.2% more than the previous year. Let me now refer to the group's debt position. Since 2011, we have reduced our debt by over EUR 9.3 billion and have a net positive cash position in 2018. The positive trend in our business is very efficient management, as well as the divestment of non-strategic assets for the group are the reasons behind this major reduction in just seven years. in 2018, we have done away completely with our net debt after the significant investment made in Abertis for an amount of approximately EUR 3.5 billion, offset by the divestment of a minority stake in Hochtief for EUR 2.4 billion, plus cash flow generation of EUR 1.55 billion. Thus, the group has ended the year with a positive net cash position of EUR 3 million, EUR 120 million if we exclude debt without recourse to the group, with a Standard & Poor's BBB rating, and therefore in the investment grade category. Going into a more detailed breakdown of our sales, I'd like to mention that our revenues are highly diversified geographically, with a strong contribution of the more developed economies. The main regions for the group are North America, with sales representing 46% of the total, up 7.6%, or 11.5% if we adjust for the exchange rate impact. Australia, with 20% of our turnover, amount also impacted by ForEx. If we adjust that, growth in the region would have been 10.4%. In Europe, 21% of our revenue, up 9.8%. Our businesses in South America brought in 5% of our total revenues, up almost 10%, while Africa reached close to 1%. Our backlog is at EUR 72.2 billion, and the breakdown is similar to that of our turnover. It's important to point out that 84% of our backlog comes from developed economies, particularly North America, with 41% of our backlog, up 18.4% in 2018. As you can see in this slide, our main markets have had a very positive trend in 2018. By countries, the most important in turnover contribution were the U.S., with 39% of our turnover, Australia with 20%, Spain with 14%, Canada with 4%, and Germany and Mexico with 3%. These countries together, as I said before, represent over 80% of the total. Particularly good trend in the North American market, in spite of the negative ForEx impact. Without this effect, growth would have been 10.3% in the U.S., with turnover at EUR 14.2 billion, and 26.6% in Canada, with a turnover of EUR 1.47 billion. Our turnover in Australia has also been impacted by the currency depreciation, with EUR 7.257 billion, with growth adjusted by ForEx impact of 10.4%. Spanish market has also shown reactivation of renewable energy projects and buildings, with a turnover of EUR 5.2 billion, which is up 17.7%. As for the backlog, very strong growth in contracts in the North American and Spanish market contributed to the very solid growth of this backlog. Specifically, our U.S. backlog is of EUR 24 billion, up 14.8%, with very relevant contract awards both in construction and civil engineering projects. Canada closed the year with a backlog of EUR 4.4 billion. That's up 35.7%. Spain ended the year with a backlog of EUR 7.7 billion, up 13%, driven by the award of renewable energy projects and an excellent evolution of contracts for Clece. In Australia, backlog grew 6.6%, if we adjust for the exchange rate, up to EUR 17.9 billion. So overall, our strong geographical diversification guarantees the stability of our turnover against potential changes in the economic cycle in certain markets. Our construction turnover was EUR 28.78 billion, up 5.7%, or 10.7%, if we adjust for the exchange rate. Excellent trends in construction were driven by growth in the North American markets, which grew 9.4%, in spite of the negative ForEx impact. Specifically, the U.S. and Canada, which represent over half our turnover in this area, saw an increase in turnover of 12.2% and 26.6%, adjusting for the ForEx impact. In Australia, up 9.2% in like-for-like terms, with a strong growth in mining services, up 25%. Also, turnover in Spain up 13.5%, thanks to the recovery of the construction market. Industrial services brought in EUR 6.4 billion, up 2%, or 6.7% in like-for-like terms. As you know, the industrial services area has a very diversified and dynamic business or energy and transportation. These are activities that are easily exported, which all contribute to driving the profitability of this business. In 2018, turnover in this area was driven by the recovery of investment in renewable energy projects, particularly in our domestic market, up 30.7%, as well as in Latin America, up 20.8%, thanks to Chile and Colombia, and also driven by the transmission lines business in Brazil. Finally, our service turnover in 2018 was EUR 1.5 billion, up 4.1% in the year. Our exposure in the national or domestic market is 93.5% of this turnover, up 3.3%, while the European market, essentially Portugal and the U.K., represents 7%, and we are up 16% in the year. Let me now show you our business diversification by risk profile. Approximately 60% of the group's revenues come from businesses with a low risk profile, split between operation and maintenance services and construction management. Services represent 25% of our turnover and include operation and maintenance contracts for transport infrastructures, social energy, and industrial and mining facilities, as well as city services provided by Clece. Most of these contracts are long-term or have been extended recurrently with traditional clients. 32% of our revenue comes from Turner's business in the American market, which, as you know, has no price risks in its construction management activity. 3% comes from construction activities in Spain or building activities in Spain and Germany, which are also very low risk. The remaining 40% comes from our engineering and construction businesses, of which approximately 15% are for projects that we are participating in or developing ourselves, mostly in developed markets. The group are still working continuously on the operating efficiency of each of our businesses. Our construction EBITDA was EUR 1.7 billion. That is 15.4% more than in 2017, taking into account the ForEx impact. Our margin rose 22 basis points to 6.2% because of a better performance of the businesses globally, driven by the growth of some higher margin activities, like for example, mining services. Our industrial services EBITDA rose to EUR 645 million. That is 8.5% up, adjusting for the ForEx impact. Our margin over sales was 10.1% stable with respect to the previous year, demonstrating the sustainability of margins in this area, thanks to the diversification of the businesses and markets in which we operate. Our services EBITDA was EUR 80 million, up also 8.5% with a margin over sales of 5.3%, 20 basis points higher than the previous year, thanks in part to the growth of the international business. The group's net attributable profit is EUR 915 million. Nominal growth of 14.1%, driven by very solid growth of our operating businesses, 9.1% in like for like terms. Specifically, our construction business profit without Abertis was EUR 410 million. That is 6.1% up or 10.5% up in like for like terms, with a solid operating performance of all our businesses. Net construction profit with a constant perimeter, that is retaining 72% of Hochtief for the full year, was EUR 445 million, up 15%. Including Abertis' indirect contribution through Hochtief's 20% stake, the net profit for construction was EUR 469 million. Net profit in industrial services up 2%, 8.5% in like for like terms, driven by recovery of investments in renewable energy projects in the Spanish market. Also, our net attributable profit from services was EUR 37 million. The ACS Group net attributable profit in 2018 includes the net Abertis contribution from June of EUR 175 million, EUR 116 million directly from ACS, included in corporation, and EUR 59 million indirectly through Hochtief after deducting minorities. in 2017, there were non-recurrent one-off revenues for a similar amount, mostly due to the Urbaser divestment. Abertis, in 2018, had a net profit of EUR 1.7 billion. That is 87.4% higher than the previous year due to the positive impact of the Cellnex divestment with capital gains of EUR 605 million, which have no impact on ACS's results. Net comparable profit of the year was up 15%. In a year, Abertis toll highway business showed a positive trend thanks to traffic volume increases in Spain up 3.3%, Chile 3%, France 1.7%, and Italy 1.2%. Revenues EUR 5.25 billion, which in like for like terms was up 5%. The year's EBITDA at Abertis was EUR 3.5 billion, up 7% in like for like terms. The Abertis board has proposed to the general shareholders meeting the payout of a dividend on account for 2018 of EUR 875 million, subject to the evolution of the company's rating. Going back to ACS, as I said at the beginning of my talk, gross cash flow has risen 17.2% to EUR 1.95 billion thanks to the excellent performance of all the businesses. Variation in our operating working capital has brought in EUR 92 million in cash, while our net operating investments were EUR 497 million, which gives us a net operating cash flow of EUR 1.55 billion. That is 4.1% more than the previous year. The group has also allocated EUR 1.04 billion to financial investments and concession projects. Also in 2018, there have been cash flow entries of EUR 117 million, mostly as a result of a delayed payment for the Urbaser divestment. So free cash flow in 2018 was EUR 630 million. Let me now briefly review trends in the different components of these operating cash flows. First of all, our gross operating cash flow has had an annual average growth rate of 19% in the last four years, demonstrating the excellent financial and operational performance of all the ACS Group companies. Net operating investments have been between 1% and 1.4% of our turnover as a result of a very strict investment policy in all areas. Finally, I would like to underscore a very strong control working capital, which has enabled us to obtain a positive cash flow balance in the last few years. Now I would like to give you further detail on our investments, our financial divestments, as well as our asset projects and our concession projects undertaken in 2018. Starting off by order of size and relevance, the strategic acquisition in Abertis, as I have already told you, entailed a total investment of EUR 3.488 billion for that joint stake between ACS and Hochtief of 50% in the holding company that holds a 98.7% stake in Abertis. The 24% sale of Hochtief entailed a divestment of EUR 2.41 billion. The MásMóvil disposal, that was a total of EUR 411 million. The cumulative investment figure for the year, EUR 610 million in projects that are concessions, of which EUR 442 million correspond to industrial services, different renewable energy projects in Spain and the U.K., South Africa, Mexico, and Peru, as well as projects for electricity transmission lines in Brazil. EUR 95 million correspond to concession projects, Iridium, and EUR 73 million in Hochtief's projects. Our disposals of concession assets total EUR 476 million in the year. EUR 386 million of that figure were for divestments in industrial services, including the sale of Saeta Yield for a total of EUR 241 million and a number of wind farms in Latin America. Therefore, the net investment in concession projects for the ACS Group in 2018 totaled EUR 134 million. The excellent performance of our funds from operations during the year allowed us to eliminate our net debt completely, as I said earlier. Our treasury position by the end of the year, therefore, was EUR 3 million. It would have been EUR 120 million, without taking into account the project financing debt, despite the major investments that we have made during the financial year, as I said before. I would like to talk about the improvement in our financial position thanks to the endeavors that have been made to reduce our debt, and that started back in early 2012 when we took the decision to reduce the level of risk for the financial structure of the group. Over the last few years, we have been able to reduce our net debt by more than EUR 9.3 billion thanks to a determined strategy that combines the momentum in production, divestment in non-strategic assets, discipline management of our working capital, and tight control of operations and the investments in those operations. Reduction in the financial expenditure and improvement in our financing conditions through different refinancing of our bank debt. We have obtained in 2017 also the credit rating with the investment grade category, rated BBB by Standard & Poor's. This financial structure, which is more solid, more robust, allows us to focus on and undertake new investment opportunities as we move forward to ensure the long-term growth of the group and continue to create value for our shareholders. Let me take you through the different business areas. The construction backlog totals EUR 59.35 billion, equivalent to 24 months of activity. That is up 6.9% or 7.6% when adjusted for exchange rate impact. This growth is underpinned by the good performance of the North American market, the Australian market. The international backlog represents 96% of the total construction area backlog. Industrial services, the total backlog at the end of 2018 was EUR 9.845 billion. That's equivalent to 19 months of production. That's up 8.5% in like-for-like terms, and with 74% in international contracts. The services backlog total EUR 3.028 billion, equivalent to 24 months of activity, up 33.6%. Let me now take you through the key contracts that were awarded to us in the area of construction that have helped to make our backlog grow. The project for the construction of the Rozelle interchange in the WestConnex projects that will link up the M4 and the M5 in Sydney, Australia. The construction of the new suspension bridge, an international bridge, Blue Water Bridge, which is 2.5 kilometers long between Detroit in the U.S. and Windsor in Canada, as well as the ports of entry in each of those countries. That's a PPP, by the way. The construction of the new light rail line in Montreal, Canada, another PPP. The extension of our mining services contracts at the Mount Arthur coal mine in Australia. The construction of 6.5 kilometers of automated people mover facility in the Los Angeles International Airport, that's another PPP. A contract for the implementation of the civil works in the hydrogeneration plant and the drainage systems for the Peace River, the northeast of British Columbia, Canada. The contract for the management of the landing base for helicopters and for vessel disembarkation in the marina in Australia. The project, which is also a PPP, for the construction of a prison facility in Waikeria in New Zealand. The construction of the new headquarters for the California Natural Resources Agency in Sacramento. Turning now to the key projects awarded to us in the area of industrial services that have also helped to make our backlog grow. The construction of a 300 megawatt CCGT natural gas plant integrated with the seawater reverse osmosis desalination Plant there in Duqm, Oman, the construction of approximately 175 megawatts of photovoltaic facilities in Japan and Mexico. The EPC contract for the construction of the project to produce energy, natural gas, thermoelectric plant there in Vale Azul in Brazil. We have engineered the contract to provide two jackets for the Tyra Future Development Project in the North Sea in Denmark. Installation of a smart transport operation maintenance system for the coal project in WestConnex in Sydney. Lastly, let me talk about the services backlog there and the projects for last year, more than EUR 355 million in building facility cleaning project, more than EUR 500 million in facility management contracts for retirement homes, and more than EUR 150 million in home health contracts. The key contract awards so far in 2019, and I believe we've reported on these just recently, the biggest one is the project to build the new Hampton Roads Tunnel in Virginia, the U.S.A., for a value of EUR 3 billion. In London, we've also been awarded the construction of the new Euston station for the high-speed train link. That's a project for a value of EUR 2 billion. Quite recently, we've just been awarded a project for the design, construction, maintenance of a new regional rail system in the metropolitan area of Sydney. The contract is for EUR 760 million. All of these results have boosted our global positioning in the infrastructure sector. I think I could sum it up for you in four key points. We continue to be the world's leading company in our industry. We have competitive businesses with a diversified risk profile. We've detected good opportunities for investment in our strategic markets that will allow us to grow in a sustainable fashion and profitable fashion over the next few years. We have also bolstered our balance sheet by taking our net treasury position at the end of the year, which to a good place where we'll be able to include further investment capacity on our projects next year in concessions. As you know, we also have an international leading position in engineering construction sectors, as acknowledged by the prestigious journal ENR every year. The ACS Group also is leading the ranking for the biggest or the most important international engineering construction company in the world, and that has been since 2012. Also in our specialties, the group is also a leader in the infrastructure development sector, as published by Public Works Financing for the last six years. Specifically, our group has a portfolio of 91 concession assets, of which 75% are being operated already. These assets represent a total investment that we manage of EUR 47.5 billion, EUR 7.8 billion of that figure form part of the backlog, both for construction and operation and maintenance. The investment that has been undertaken by the ACS Group in these projects totals EUR 1.291 billion, of which about two-thirds have already been paid out. These figures show the undertaking that we have made to develop the concessions in our group. Likewise, in the energy infrastructure sectors, we also have a highly competitive position. At the moment, we have a portfolio of about 50 different renewable energy asset projects for transmission lines, for desalination projects, irrigation, water purification projects, and other energy assets. The renewable energy assets that we have total close to 2,000 megawatts. Let me highlight for you the photovoltaic facilities that we are developing in Spain, and that total an installed capacity of 1,235 megawatts. ACS's contribution, which is totally committed in these projects, is more than EUR 1.6 billion, of which 800 million have already been invested. The regions where the group has the biggest footprint have very positive prospects for growth for the infrastructure sector. The ACS Group has identified a portfolio of more than 150 PPP projects to a total value of EUR 230 billion to be developed over the next four years. These are all located in the group's strategic regions. The breakdown by geographical area for you, 35% of this portfolio is in the U.S., 20% in Canada, 25% in Australia, and 20% in Europe. 90% of the total backlog of this portfolio are infrastructure projects linked to transport and 10% social infrastructure. With regard to the possible projects that we have, those prospects for renewable energy, we have more than 10,800 megawatts already being developed, of which 7,700 megawatts are in photovoltaic facilities, 2,900 megawatts in wind farms, and 200 megawatts in CPV plants. These are key figures which place us right up there on the list of the most dynamic operators in the sector. To finish, if you would allow me, I'd like to conclude this presentation by taking you through the key milestones achieved in 2018. First of all, we have delivered on our targets for growth, profitability, and a financially solid position as we set out to do. Secondly, we've completed that takeover of Abertis. This strategic acquisition, as we have said many times already, significantly improves our visibility and our future flow of funds for the group. We also have great capacity to invest thanks to our solid financial position and balance sheet and our strategic positioning in the economies that are the most developed economies in the world with high potential for growth. All in all, we do hope to be able to deliver on the expectations for growth and profitability that we have made as we move forward over the next few years. In particular, the growth for net profit in the group in 2019 is expected to be more than 10%. In other words, we expect to make more than EUR 1 billion in net profit. Before finishing the presentation, once again, I would like to thank the more than 195,000 people who have made their contribution to the group's excellent results in 2018. 195,461 people are working in the group in more than 60 countries. 75,917 are women, 24,097 have a high university degree, and more than 8,000 are workers who form a part of disadvantaged groups in society, such as people with disabilities or victims of gender violence or people at risk of social exclusion. Thank you very much to all of you. As I did tell you, we will now have a Q&A session. Please go ahead with your questions. I am sure there must be one question at least here in the room. Yes, please. Good morning. Good morning. I have just one question for you, if you wouldn't mind. It's about dividend. Could you give us an idea of what dividend is going to be proposed by the board for 2018? Well, we are going to propose it in the March board meeting, as we do every year, but there will be certainly an increase because of the excellent results and the good outlook we have for 2019 as well. Good morning. Guillermo Fernandez Grau. Also about the dividend, will it rise in line with the rise of net profit? Or maybe, as you have done in the past, there might be a payout increase from the current 50%-55% to something closer to Hochtief's or CIMIC's? Another question, there has been a very significant change in working capital in the last quarter, but also a significant increase of factoring. I wonder if in ACS, excluding Hochtief and CIMIC, what the evolution has been in the year. Then maybe one final question. Just to understand the timing, I guess you still have EUR 800 million to be invested in equity, in the renewable energies. What's the calendar for those investments? Well, Alfredo will answer the last two questions for you. Let me take the question on the dividend. I cannot say anything to you about that right now until, of course, that board meeting has been held, but it will be certainly above 50% or 55% as a payout, definitely. But the board has to examine it. But I think there will be a significant increase, and we will try, of course, our best to reach the same level as other companies in the group perhaps. But until March, we will not be able to tell you anything about that. Factoring. You were asking about factoring. This has always been a financial resources funding management tool in those markets and in those activities that are highly CapEx intensive, and especially if you are working with clients that are solvent, that you know very well, then it is a logical way to help with your CapEx. It is simply a management tool. Where we are making most investment, well, certainly civil engineering work, civil works, and tunneling equipment, in Australia, Latin America and Europe. Basically then, it is a way of managing your CapEx. Historically, though, we were never in those sectors. When we have started to operate in those sectors, what you cannot do is go from zero to 100 overnight. So we have had to move upwards gradually. EUR 1.5 billion is the investment. That is actually more than the amount we have divested. 50% is the expenditure figure. If you can manage properly your working capital, then it makes it a tool for you. That is what I would say to you. This has been a way of managing efficiently our CapEx. What was the other question, please? The EUR 800 million in investment. Yes. Well, following the philosophy that we have in the group, we, of course, are working with our customers. Then if we see opportunities for investment in transport or in energy will we go for those opportunities. It seems that this is a good opportunity now. There is a window of opportunity. There is a lot of demand for renewable energy. What we are doing in the industrial areas is really promote that figure of the EUR 800 million. Well, I think we will be investing that figure very soon. We have 1,500 megawatts, I believe, that should be up and running by the end of the year. But it is not just about those megawatts. There is a lot of demand for renewable energy, and we will invest as the projects are given to us. Good morning. Good morning. My name is Daniel Gandoy from JB Capital Markets. I have a question about the industrial services investments. After the Bow Power minority stake that you acquired, will you be consolidating 100%? What is your strategy for the future? Are you thinking about keeping 100% of that division with all of the investments you will be making? Will you still be doing that in the minority stakes that you hold? What is the strategy there? Would you perhaps be reaching some agreement with an infrastructure fund? Going back to factoring. I wanted to just pick up on your comment. If most of that factoring has taken place in mining projects, CapEx projects, then I understand from what you are saying that this has happened in subsidiaries that are neither CIMIC or Hochtief, or is it in ACS? Could you just confirm where? Thank you. Well, as for your first question, obviously, Bow Power was a company that was designed to develop energy projects with a partner we had, GIP, that was created. Our partner wanted to rationalize that investment, wanted to divest their holdings in renewable energies, and it made sense for us to do it together, because otherwise there could have been a conflict of interest. We had Bow Power, which was a development company. It did not make a lot of sense to sell it when we wanted to continue those developments, and that is why we decided to buy it, that shell, with some assets which we know very well and which we hold. And of course, we will be growing. The volume of investment is very large. We probably will not retain 100% because we might be talking 10,000 or 15,000 megawatts, but we have not decided what the mechanism will be yet. We will gradually bring in partners, naturally, to help us finance the project, both the equity and the debt. There is basically no more to it than that. Will there be a significant impact on consolidated debt? Well, obviously, you have to make investments with capital and debt. But, of course, in such an ambitious investment project, some partners would come in with us. Your other question was? Oh, about the factoring again. As I said before, basically, we have used it as a way to smartly manage our working capital. When you have a very capital-intensive business, you can finance it yourself. But if you have solvent clients that can do it, so much the better. And that has happened not just in Australia, but also in Latin America, because we have mining services there and tunneling machines. Basically, the strong CapEx investment parts are the ones that we try to finance in this way. Of course, we started from scratch because we were not in that sector and in markets where it was not so common to use factoring. There was a ramp-up in factoring growth, and now it is stabilized, I think, and should remain at the current level. But because of our basic philosophy, which is just using it as another financial tool, which when it is more efficient, you use that instead of taking up debt. Plus, just to add to that, factoring culture is something we have always had as a way to optimize our finances. As Ángel said, as you have seen, our expenses have significantly improved, over 15%, as a result of that, too. Extending this culture to the new markets is the way to go. In those markets where you have more CapEx, obviously it's easier to do it. In those markets where they didn't have that culture and you're just deploying it, the impact is greater initially. But it's a general approach to optimize our financial resources in the group, which we've been using for many, many years. Here, if I may. The Abertis annual report said about that claim, the AP7, there has been a recent ruling of the Supreme Court. When do you think Abertis will be notified formally? Thank you. We don't have a date for that yet. We know that the court still has to officially notify the ruling, and we're expecting perhaps over the next few weeks or months to hear that. We'll just have to wait for that. A number of questions that have come in have already been answered, but one key one is the performance of our operating margins. What do we expect as of 2019, 2020 with regard to our operating margins, especially for industrial services construction? Well, the whole organization and all our structure has the aim of improving our margins year on year. As I said before, I showed you a slide with our risk diversification. We are in developed markets, so our risk profile is coming down. Essentially, I would say risk impacts only about 25% of our turnover, and our results show that year on year, we're improving. That's always been our strategy, and it's given us the chance in the last few years to improve our risk profile and reduce our debt. With the rising margins in our operating businesses. Yes, of course. Plus, also, as we were saying, since we have a risk management culture, when we position ourselves strategically in the different global markets, our aim is always to start managing risks from the very start, which is when we put in the bid. We are always very careful to manage those risks according to the very strict return criteria that we have. We operate in markets which, as you know, have sufficient volume, as you saw in the slides, with all those pipeline projects and the backlogs. In all our areas, the backlog is growing, and that enables us to compete effectively in markets where there is a very narrowly defined competition, because we have different competitors in each market and enables us to be more selective in order to be able to continue managing our margins as effectively as we can, as our chairman said. There are several questions about Abertis. Just to sum up two. First is, what is the strategic plan you have for Abertis? There's been no announcement for a year and a half. Could we just give an update of what Abertis' strategy will look like for the coming years? We're also being asked about the impact of Abertis in our own results for 2019. Perhaps you could take the question on impact, and I will hand it on. Well, the accounts aren't that straightforward. It's pretty tricky sudoku this year. This last year, we've had 7 months of Abertis on our books. We've also had that 10% of Hochtief for 10 months, we've had 50% during a certain number of months. It's not easy to work them out this time. Abertis then. Abertis is undergoing a strategic review at the moment. The two partners would like to improve the strategic positioning of the company, and hopefully, that would actually improve the bottom line as a final outcome. I can't tell you much more about it at the moment. You all know about Abertis' assets. We should be able to improve on them slightly, and then there should be a platform for growth. As we move forward, there will be a contribution that will be proportional to that. As you know, we have a 30% direct stake and 20% through Hochtief, so it's 50%. We should get 40% of the net profit, and it should be better than what we've seen up to now. On the strategy plan. Let me remind you a little of the timeline. October 30, was the consolidation of Abertis, and the incorporation of the two new partners. On December 10, the very first board meeting was held. At that board meeting, the decision was taken to undergo or to carry out rather, a strategic review on Abertis. That was what we reported that we would do as the two partners, and that we would tell the market about the results when we finish. That is where we are right now. We are carrying out that strategic review. It is being done by a task force, a strategic team from Abertis and also each one of the shareholders. We're going out to every single facility, every single project we've got on concession, one by one. We're covering it all. It's very positive. I don't know, perhaps in a month's time or a month and a half's time, we will have completed that review. At that point, Abertis will report to the market on the findings, the results of that strategic review. You've probably seen yourselves today in our presentation that in every single market that we're doing business in and where we have a secure footprint, we've identified when we talk about EUR 230 billion in PPPs, and that would obviously have a positive impact on Abertis. We are talking about projects that we are already tracking. In other words, we're either preparing the bid or preparing the presentation or looking at the financial side of it. These are all projects that are there as prospects for us. When I give you figures in our presentations and they change, it's because of course, there are different projects. Projects that come out of that figure and new ones. You probably noticed that the bulk of those projects are in the U.S., 35% there, 20% in Canada, 25% in Australia, and then the rest in Europe. That's the EUR 230 billion project portfolio. We won't be successful in getting all of those, but we will certainly get many of them. This could certainly help to relaunch a bit of the strategy in those markets in which it doesn't have a good position yet. That's the U.S. market, the North American market, Canada, Australia, and some European countries, too. Guillermo. Yes. I just wanted to follow up on what Marcelino was saying. What about Abertis? Will it get into a greenfield project right from day one with ACS, or will it just join in after the construction phase? We're talking about Abertis, but also our partners, Atlantia, which as you know is one of the main concession companies in the world. What we want to do is to optimize all those resources, depending on the different projects. One of the goals of the Abertis investment was precisely to maximize our presence in concession projects. In fact, in this way, we'll be able to do exactly what you are saying, to raise our equity position in those projects, which we think makes sense for the companies, as long as we feel that that's the best way to compete in each particular tender. We want to increase our equity position. Thank you. Olivia Peters from Macquarie is asking, in 2018, we invested over EUR 600 million in concession projects, including both infrastructures and others, and we spoke about a pipeline of potential prospects for EUR 230 billion after 2019. She is asking, how realistic are these prospects? How much of the pipeline might we be able to capture, and what investment volume would we undertake in those years? Well, in addition to what you have already seen in the presentation that has been made by the Chairman, you know what our position is in the concession industry. We are the number one company up there at the top of the list in concession projects. How realistic is this? It is totally realistic. I am telling you about these projects, the projects we are tracking at the moment. What is the timeline for the EUR 230 billion? It is not just EUR 230 billion that will come up and if for contracts be awarded in 2019. It will also be for 2020 or the next year. Maybe it is a timeline over the next 2-3 years. That is what we have identified. This is not static at all. This is a living creature that is changing. Projects are coming up and projects are coming out. What is our success rate in the markets in which we are competing as the leading company? Our average success rates to date are above 25%, and I want to be prudent here with the figures I am giving you, but I would certainly think the figures are more than realistic, but this is the reality. Let me see. We are the leading company in infrastructure projects globally over the last 30 years, and we are also a leading company in the renewable energy sector. What used to happen, we used to actually sell off the projects, and now what we would like to do is to try and unlock the value in these projects now that we have Abertis. With renewable energy, we are going to do something very similar to be able to also make money not just out of the construction, but the concession itself. We are very active in that. Let me see if I can give you a bit more color on this. The EUR 230 billion, and I think you have got the figures in the presentation, 50% are road projects, 40% railways, and 10% social infrastructure and other miscellaneous infrastructure projects. That gives you some idea of the scope, but I think that came up already in the presentation. There are two highly specific questions. One is financial, and one about PEMEX, our relationship there, given the problems in Mexico and the volatility there, political changes over the last year. The factoring, the increase in factoring, has that got anything to do with PEMEX, and if we are going to continue to work together with them in a constant fashion? PEMEX, as you know, is a very important customer of ours in the industrial services area. Has been for a long time and continues to be. Of course, in Mexico, when there are elections, it seems like everything comes to a standstill in terms of new projects and new contracts, and even with execution of ongoing projects. In spite of all that, we have been able to be paid very effectively by PEMEX. Our receivables are managed very actively, and perhaps because we are very close to them, and we are very useful to them. Amanta, which is our services business in Mexico, is the main contractor in industrial services, very far ahead of the second. We believe that PEMEX will continue to be a very major customer, although we are getting, of course, more of a market share in the private sector. It used to be PEMEX, then it was the Federal Electricity Commission, and now the private Mexican industry represents just over a third of our turnover there. That, of course, guarantees our stability. Which doesn't mean PEMEX is no longer an important customer. It's extremely important customer, and of course, that is a sector that drives Mexico's economic growth and development. We're very close to them, and through successive governments, we've continued to give them excellent service. We're very pleased with that. As for factoring, we don't do factoring with PEMEX in Mexico. A question, very specific question for Mr. Fernández Verdes about the comment you made last week ad hoc in their call on the innovation center that you were going to create. You spoke about several, but specifically about one in Madrid. Could you give us some more color on that, and will it also provide the cover for all the other companies in the group? Yes. We did talk about this the other day. This is a project that we kicked off a couple years ago, but it's actually an ACS project. Hochtief is obviously included in that ACS project. We're calling it digital transformation. That's a strategic commitment that we're making. The goal, as always, is to optimize the control of our risk, to optimize cost, to make sure that we're using highly effective tools to do that, and so we can actually provide better results for our clients and our shareholders, and also to make the day-to-day work of our employees easier. It's a highly ambitious project in the sense that it will transform or may transform the modus operandi, the way we work on a day-to-day basis, and it will require a certain amount of time to be fully developed as a project. We've started the initial implementation phase. We are making all the right contacts with professional sectors to improve our knowhow. Colloquially, I would explain it in this way. It's how can we actually use all of the knowhow that we have built up in different sectors and specialties, tunnels, bridges, railways, countries, developments of projects, all of that knowhow that we have been building up, how can we put it all together now? Because the different teams that have been working over the years on this project tend to be the owners or that they hold the repository of information. We want to make sure we can pool all of that information knowhow so that it can be used by the whole group. So if in the future anybody would like to have some recommendations, some advice or some tip on a project that has already been carried out in the past by someone in the group, it would be information that would help them to perhaps be aware of problems that might come up. You're always going to start off from scratch in a project, but it gives you a slight edge there, and you'd always have somewhere to go to in the company to ask the people who are the implementers of our projects scattered all over the world to get their ideas, their approaches, their tips, their advice. To do that, we are planning to set up different centers in different countries. There will be one in Madrid, another one in Germany, another one in the U.S.A., and one in Australia. To be able to cover the full scope of the geography of our business in the group, we will probably have a distribution hub that will be located in Canada. We are starting to make contact and establish relationship with different IT, with different university, Indianapolis, MIT, IBM, Watson Artificial Intelligence in Massachusetts. We're doing this now. This is an ongoing process. We're trying to see how we will be able to work that digital transformation of the group. It's a very attractive project, but for it to see the full light of day will take us some time. It's going to be a project that will have to be developed over a number of years. The other day, a comment was made about this in Germany. You're right. Integration is also very important, the integration of all of our employees in this project, so that from the very outset, from day one, they will be able to see how everybody can make their contribution to the group in this way. But as you see, this is a midterm project we're talking about. Any other questions, please? It seems that everything was pretty clear, what we've done already and what we are going to do. Thank you very much for joining us. I would imagine there will be some drinks and snacks here for us. I don't see it at the moment, but you'll join us. Thank you.