Good afternoon, and welcome to the presentation results of DOMINION. If you want to follow this presentation in English, you can do so selecting the English language on the world icon at the bottom of your screen. Before we start, we'd like to remind you that after the presentation, as usual, there will be a Q&A. You can write your questions in the Zoom Q&A section or put your questions by phone or by raise hand in the Zoom menu. We'll start the presentation with Mikel Barandiaran , DOMINION [audio distortion], Roberto Tobillas, Managing Director, and Patricia Berjón, Director for Corporate Development.
Hello, everyone. Good afternoon and thank you very much for attending this conference call on the first half of 2024. We barely published the information an hour ago, and the first thing I'd like to highlight in these results is that we find ourselves in the first half of the year, where the business is moving forward positively, both from the point of view of the business portfolio and contract performance, and from the point of view of strategic advances, some of which have already been included in the figures and others are to come in the coming months. Although it's true that we've been through a more challenging half year in the development in invoicing and in investment intensity margins, the positive dynamics and the medium and long-term objectives are still in force and will continue to materialize during the rest of the year and the rest of the years in the strategic plan.
There are two very clear subjects that should be mentioned in this first half. On the one hand, there's the inorganic aspect linked to the mobile devices, which has an impact on sales negatively and in working capital dynamics. And also, during this half year, we've had less activity in renewable projects. Regarding the capital allocation, investment, and debt criteria, we are according to plan in conformance with the payment commitments you all know about, and the strategic transformation in our plan. During these first six months, a large amount of these investments have been concentrated, while there have been no operations in the opposite sense, with a temporary decoupling that will be offset in the coming quarters.
Finally, I would point out the good operating margin dynamics and the recurrence of the business, represented by the high growth in turnover and margins in the service segment, without forgetting that in the last line, we continue to have very high financial costs. We're going to see all these dynamics reflected in figures, and I'll start with the income statement, which shows practically a 5% organic increase. Although the global growth is practically flat, there are almost EUR 20 million turnover eliminated inorganically after the restructuring of the businesses carried out in the second half of 2023. That is, the inorganic part subtracts 3.3% in the half year, while the exchange rate effect also subtracts 1.2%.
Regarding margins, we highlight that the business operating profitability it continues at very high levels, 14.9% over sales, the contribution margin, and 12.5% over EBITDA, which remains over that 12% for the third quarter running, and consolidates the dynamics we've been seeing since the beginning of the year 2023. I'd like to remind you that the strategy is to focus the company on, the more profitable activities and businesses, and reduce activities with lower margin profiles. There are no significant variations on the amortization side, and regarding financial expenses, we have a somewhat buffered net effect because of the positive contribution of the exchange rate differences in the comparisons, in the half years.
But there's a significant increase in financial expenses, somewhat more than EUR 6.5 million, as a result of the interest rates and the increase in debt related to the payment commitments that have been taken on during the first quarter of this year. We have an attributed net profit of EUR 16.3 million, which dropped 30% compared to the first quarter of 2023, and is completely connected to these higher financial expenses I've just mentioned. Let's see what the performance of the activities have been by business segments. We start with sustainable services, which has slightly increased its weight in invoicing and in margins over the total company, and represents 71% in turnover and 62% in contribution margin, and provides a high recurrence to the company's income statement.
Services reaches a turnover of EUR 401 million, which means growing 2% compared to the same half last year. But since in this segment concentrates the entire half year inorganic effect, the organic growth is much higher and is at a very healthy 7.9%, much higher than the target established in the strategic plan, and showing the strength of the areas that we have strategically put our stakes on. Regarding the contribution margins, once again, we see the results of our positioning, mainly because of the environmental services, with a 12.4% margin in the six months and 12.7% for the isolated quarter, which is the highest figure in the historical series for this segment.
There are no main headlines in the activity for this segment beyond the good performance and the positive prospects for the coming quarters. The 360 Projects segment has had a more moderate activity than in previous quarters and compared to the first quarter in 2023. The reason is due to the execution pace for renewable projects as a result of various factors present during this first half of the year. During the first quarter, we said that we were at a time of transition, since we were completing the Dominican Republic farms and taking the activity to the European environment. In parallel, during the second quarter, elections were held in two of the geographies we operated in, Dominican Republic and Mexico.
This always slows down some of the procedures, but both elections have had positive results for our interest in these regions. This is the case of the Dominican Republic, where in June, we opened one of the five farms that we about to come into operation, and the rest will be connected in the coming months. Finally, we haven't performed in Italy at the same rate that we had been doing in the Dominican Republic, since we are trying to pace the investments in the executive projects with the existence of agreements in this investment. For the rest of the projects, industrial potential infrastructures, the pace is still strong, and progress has been made in projects that are closer to generating a direct turnover or being included in our portfolio figures.
For example, a project in the Latam hydroelectric power station, a distribution networks, or an anti-tsunami alarm in Chile. The closing the portfolio for RP has been EUR 601 million, with no major variations compared to previous quarters. The maintenance of these projects and the recovery of the execution pace in renewables should take us to a second half of the year, where the projects will come back to their previous levels. Regarding the 360 Projects, the levels are still above the goals, 18.8% in this first half of 2024. Finally, the segment participation infrastructures, the business in [inaudible] pretty similar to the same half in 2023, since we have the same plant in operation that we had at that time.
Along the way, we have disinvested in Valdecarretas , and now the Cerritos wind farm is available for sale. The infrastructures under construction carried out in 2023 in Dominican Republic are about to be connected, as I said, and about to join the COD, and 80 MW are close to be executed in Italy. Regarding the Cerritos wind farm, very specific progress has been in this connection that could take place during the third quarter of this year, and for which we have several purchase options on the table. Regarding the balance sheet movements, both movements were already carried out and were discussed during the presentation of the results for the first quarter of this year.
On the one hand, we've had to make payments related to corporate operations from previous years, the most important of which refers to recovering the total control over the renewable business, with the purchasing of the stake in Incus for EUR 67 million. And the other EUR 9 million euros are earn-outs in operations such as Bygging India, Tankiac, and other environmental service build-ons. Another EUR 60 million euros have been invested in the transformation in various business areas. Specifically, EUR 20 million euros are expansion CapEx assigned to the renewable project pipeline and the device renting business, and the rest is working capital as a consequence of the reduction in retail business.
In other words, there is a net working capital nature in the sale of our devices, since there is deferred payment to the manufacturers, and reducing the volume of this business reduces the net associated operating working capital. And in March, we acquired treasury shares, around almost EUR 12 million, the objective of which was to complete the participation plan of part of the management team in the share capital of the company, which was finally carried out in June, and through which almost 50 managers became DOMINION shareholders. On the other hand, the activity had generated free operating cash flow of EUR 25 million, including the payment of taxes and financial expenses.
This increase in debt should be circumstantial, since in this first half of the year, there are many payments, commitments and investment decisions, with the goal of materializing the benefits during the strategic plan. While during the second part of the year, we will not have this investment pressure with the payout of the dividend as the only significant payout. There are no other significant movements. We have shared out EUR 15 million last 9th of July , and we also have the already mentioned earn-outs. And finally, it's important to mention that continuous growth in organic growth, with a clear operating profitability, which means that we can expect a second half of the year that will be stronger and with fewer investment needs. We foresee a year 2024 in line with the general guidelines of the strategic plan. Thank you very much, and we now move on to the Q&A.
We start with the questions. If you're connected through the Zoom app, or you can raise your hand using the menu at the bottom. If you're following the presentation by phone, press asterisk nine to ask a question. We start with the Q&A. Starting with the people that raised their hand. [Enrique Parola, Enrique] Capital.
Yes, hello, good afternoon. Thank you for the presentation. And I had two questions. First of all, regarding this growth in the second half of the year, which where you expect things to reactivate and mainly through the project side. What class or what kind of growth do you expect here? It seems complicated to reach that guidance of 5% sales for the complete year. Since the figure in the second half would have to be very significant, so I'd appreciate a little bit of color on this.
And related to this, but more long term, bearing in mind the guidelines given for EBITDA and margins 2024, 2026, and we're already seeing the improvements. But considering the year 2024, which perhaps ought to be more modest from the point of view of growth in the top line, what kind of growth can we consider for the next two years? And do you still feel comfortable with those sales growth guidelines in particular? In particular.
Thank you, Enrique. Let's see. I'll start with the second part of the question. We're saying that the second half of the year could have a very interesting increase in portfolio. So in the project side, we're very optimistic because of a significant portfolio in projects, both in renewables that are already underway, as well as projects that are funded by agencies and one-off projects. So we feel very comfortable with that plan. As Patricia said, on the project side, it is what it is. We've had some temporary differences, let's say, in the closing at the end of June, but as usual, we're going to see what the operations are in December. Again, we see a temporary issue, but there's nothing that has dropped off. So we could have volume in Italy, we could go back to have more in Dominican Republic, significant projects under execution.
I think that we have to wait until the last quarter to see the whole picture, because it could be clearer then. But in any case, Enrique, I would add that in this first half of the year, we've grown organically at a rate of 5%. In other words, although we've seen a slowdown in projects, perhaps the global figure for the company is at 5%. I think it's important for us to consider that in that simplification process that we established in the strategic plan, we're going to carry out divestments. And so when we talk about increases of 5% in sales, as Patricia said, we're talking about organic growth that will be affected by those divestments.
Understood. Thank you.
We continue with Juan Peña. You're mute, Juan.
You can hear me now, right?
Yes.
Perfect. Sorry. Hello, good afternoon. I had a few questions. First of all, the infrastructures you mentioned, Patricia, in Dominican Republic, that were going to come in in the following months. And you mentioned divestments. Are these divestments for the second half of 2024, or would that be in 2025? And linked to this, I don't know whether you can give us any visibility on the net debt regarding 2024, because the increase in this H1 is quite significant, and it surprised us, or at least me. And if we have visibility of the things you talked about, for example, we expect it to close, finally close, during this half of the year.
Another divestment you thought of, do you have any figures in mind that could serve as a guide regarding net debt at the end of the year? That would be very useful. And secondly, regarding CapEx, you said that there's an extraordinary CapEx, let's say, or a growth CapEx of EUR 20 million. But in the annual accounts, I can't see the recurrent figure, because there's a very high figure in the investment line, and I'm not sure if that's it or whether it's included in something I don't know about. So I would like to have some visibility as to whether this CapEx growth is going to be repeated in H2. In other words, will it be EUR 4 million? How much is recurrent?
EUR 40 million, which would give us a total of EUR 80 million in CapEx, or if the other figures to have a bit of visibility. And finally, going a step further on what my colleague, Enrique, has just said. Last year, with the presentation of the strategic plan, you estimated an EBITDA of EUR 150 million for the year, which wasn't reached in the end because of, but theoretically, it was reached. And although it's difficult, obviously, to make estimates, do you currently think that those EUR 150 million can be reached on an EBITDA level for this year, bearing in mind that we have just over EUR 70 million in H1, and we've mentioned an estimated speed up in this second half?
And finally, can you give us a bit more color on the famous subject of the agreement with the industrial partner in Europe? That would be more than welcome to shed a little bit more light, because in the end, we've been talking about this for almost a year. And logically, the sooner we know something, the better for the company and for everyone. Thank you.
Well, I'll answer the questions. I'm sure I'll be helped by Patricia and Mikel. I'm not sure I wrote it all down. You talk about Dominican Republic and the infrastructures. Yes, in August and September, we'll be connecting Washington Capital 2, 3 at [La Silla] and an additional project that will start to build La Victoria in the month of September. And you know that we are a facilitator.
We're not playing as being an IPP, and that's in the process. That's in the process. It's in the process in a very attractive way, I think, in the Dominican Republic, being a partner of ours with the majority stakeholder we could consider of up to 100% to acquire the PV portfolio, that would turn the buyer into the leader in Dominican Republic, and would also be very well positioned for everything that's coming next year. And there are going to be more tenders or PPAs. So, we're not going to give concrete figures on net debt, obviously, but we do see a second half with a significant contribution in the generation of operating cash flow.
We feel that these operations can give us a different picture to what we have now in June, which, as Patricia said, we have all the inorganic investments carried out and paid for, and basically we have the equity effect, acquiring the control of 100% of the area in the renewable area. What we did want to show is that so you'll see that that 25% that we purchased is going to significantly cover the payments that we've made, both current and future payments. So I think that that's the approach. Regarding EBITDA, there's nothing that makes us think in DOMINION, and in relation to these operations, we see a positive second half to tackle that figure of EUR 150 million that we gave.
Let's see, certainly, the day we don't see it, we'll say it. But if we don't say it, it's because we're optimistic, and we do see it. You were talking about the growth CapEx. You will have seen some investment in working capital, and in Italy, we have what we paid for developments and so forth, and then we have IFRS 16 in the half. That means a net increase of EUR 6 million. And what I would say is that our CapEx, let's say, we've closed the replacement CapEx to around 8%. So we have a stronger financial discipline than we've taken in the last two or three years. And we will be working on the CapEx, and then some color on the agreement with Europe.
As far as I can say, again, we are more focused on finding a partner for the Italian portfolio. You know that if the Italian portfolio this year is to build four projects, two in Sicily, two in Basilicata, that construction isn't included in the contribution margins, because they'll be eliminated. So we feel that during the second half, we have to find a solution between three plausible options we have on the table. And we are assessing all three, and perhaps making more progress with one of them, and that's as much as I can say. You'll see it, and I think it will also be seen in the second half of the year. But like everything else, the operations are on the table.
There are names to them, and all we have to do is materialize them. I don't know if I forgot something out of the three or four questions.
No. Yes, you've covered it all. Yes. Thank you.
Thank you.
Carlos Treviño from Santander, next.
Good afternoon. Thank you for taking my questions. The first one, a follow-up, to the answer you've just given on the partner in Europe. In other words, could you go to a solution of not looking for a partner for all the operations in Europe, and go for solutions country by country, a partner in Italy, perhaps another partners in Spain? So that would be more possible than having a global partner, like you have now in Latin, especially if you're slowing down some products because you're not able to find a global partner in Europe. If you could clarify this a little bit further. And then the second question I wanted to ask is related to working capital.
In the slide book show, you compare the summarized balance sheet of December 2023 versus June 2024, and that's where you talk about those EUR 40 million in working capitals that you attribute partly to the divestment of the Phone House stores. And my question is: There, you're comparing June versus December, but most of those store divestments had been carried out in the second or third quarter last year. So I wonder if that adjustment in working capital related to those stores shouldn't have already been included in the balance sheet snapshot you gave in December 2023. And another short question: If the new project you're talking about, distribution areas and an electric power station in Latin America, that's what the effect is on investments?
Thank you, Carlos. The final question. Those Latin American projects are more export trade agencies. It would be one of the 360 Projects we usually carried out and which are collected in Europe, so it wouldn't need equity. The partner in Italy, as you say, I think that last year, when we built Valdecarretas with Japan Renewables, that was a case. But what we're seeing is that it's very difficult to come to a deal to maximize value... if you close looking the future, there are so many macro uncertainties. And therefore, in Europe, this would be specifically for the projects this year and maybe next year. And Mika was saying, we're talking about simplifying the company, and this increases the appetite and maximizes value much more.
So, yes, you're on the right track. A more bilateral focus instead of covering the whole portfolio in Italy. But we have to look at it. We have to look at the various European geographies, and there will be opportunities for PPAs, audits, and private uptake strategies, et cetera. But we'll be looking much more at the details. The working capital issue you mentioned, this was, yes, September, October last year, but in the end, because of our central purchasing structures, et cetera, we've felt this more in the first half.
So all that reduction of sales points, et cetera, even the greater effect of the renting brand as a service, means that we closed working capital level, so with that negative recurrence in December 2023, and now we've basically deleveraged it during this first half.
Thank you.
If you have questions on the chat, if you'd like to leave any more questions, this would be the time before finishing. And Martina has two questions: Are the forecasts for the 2024 to 2026 plans are maintained in spite of the difficulties half, and also whether you've considered any short-term sales to reduce debt?
Well, I'll answer the first question. It was. I also mentioned it in when I read the report. The forecast for the 2024/2026 plan are still steady. Although this first half of 2024 is more demanding, 5%. And both in 2024 and during the rest of the plan, the goals we set can be maintained. And the second question was a sales operation to reduce debt. Well, you know that we are in the process of selling non-taxonomical services, let's say. There, we have news in the press, negotiations have made progress. We have a project on the table, and the aim is not to reduce debt, but to simplify the company and move towards the plan for a sustainable services company. Yes, that's on the table, and I believe we'll be looking at it in the next quarter. The goal isn't to reduce the debt, but obviously it will have an impact. As long as we carry out some acquisitions in sustainable services.
Victoria Pérez asked, w hat CapEx can we expect for the entire year?
Well, the recurrent role I mentioned earlier, we have more adjusted CapEx levels than previous years. So a maximum of that CapEx level, and in the growth and expansion CapEx. I think that what we've had in the first half of the year could be extrapolated to the entire year.
Any further questions? Well, if you have no more questions, thank you very much for attending, and everybody, have a pleasant summer.