Earnings Call: Q2 2021

Jul 27, 2021

Good afternoon, everybody, and welcome to Ferrovial's conference call to discuss the financial results for the first half of twenty twenty one. Just as a reminder, both the results report and presentation are available to you on our website. As in previous results And although some restrictions to mobility have been lifted during the first half of twenty twenty one, we would like to highlight the financial information included in our report has been impacted by the COVID-nineteen outbreak, mainly since the second half of by the COVID-nineteen outbreak mainly since the second half of March twenty twenty. Given the uncertainty regarding the speed and the Ferrovial will continue to closely monitor trading conditions and further evidence of wider economic impacts. I am joined here today by Ernesto Lopez Motto, our CFO and the CFOs of our business units. If you have any questions, you may ask them through the form included in the webcast. During the Q and A session at the end of this call, we will be reading out your questions and who they are from. With this, I will hand over to Mr. Lopech Morpher. Ernesto, the floor is yours. Thank you, Begonia, and welcome, everybody, to the first half results conference call. Well, starting with the highlights, I would like to start with the Texas managed lanes, Where we have seen in June, traffic already above June 2019 for the NT, up 6.4% and NT 35 West up 19.4%. LPGA is still short of those Pre pandemic levels in terms of traffic, 13.6%. And we have to remind you that the numbers you'll see, May was impacted by weather conditions, but the traffic performance is strong. But more important, there is a strong revenue per transaction growth all the managed days, and we are seeing this growth in revenues from the higher toll rates and the better mix in terms of higher proportion Okay, big vehicles. Also, we got €48,000,000 in dividends from NT and LBJ. In the 407, we have seen a lot of restrictions really with the stay at home orders until June 2, But traffic has really been improving since the reopening. And in the last 7 days, the rolling performance was 32% Drop vis a vis twenty nineteen. This is July 20 numbers. We are now in July in step 3 of the phase reopen, and we'll see more on that in the presentation. In the I77, we also saw a strong recovery in this Q2, and the traffic is already at COVID-nineteen levels if we take February 2020 as per COVID. So by year end, we were achieving these numbers. I would like to say that it's not only traffic, but I will stress the revenue performance that reflects the possibility of changing tariffs and really taking benefit of a strong economic recovery or even inflation tailwind in our assets. If we move into airports, the main highlights, well, Heathrow published yesterday, also Some days before, it updated the investor report with an estimated traffic for the year of 21.5 1,000,000 passengers as the base case, of course, it provided a range of scenarios where a stress case which 13,000,000 passengers. In light of these, let's say, volatility of expectations, Heathrow Has launched a preemptive waiver of the group interest coverage ratio covenant for 2021 at the Heathrow Finance Level, the holding above Heathrow. In AGS, our refinancing was completed. We call it amend and And the debt maturity is now June 2024. In contracting, we've seen a strong performance. Construction reached 2.4% EBIT margin. This is including the impact of divestments, and I would like to underscore the strong performance at Budimex. Also, the sale of non core assets in construction is finished or on track and with very positive cash flow APAC around €350,000,000 in the first half. So the main one was the divestment of the real estate business in Poland, Also, Ulpixa in Spain. And we have other transactions that have been closed in July or are expecting closure in the coming days or weeks. Mean, one of them is Nalanda that closed in July. And we also have the Figueres and the recycled aggregates at Weber SCC That is pending final authorization, the same as Figueres. So all this should happen, let's say, in the 3rd quarter. In terms of services, we have solid operating performance across the board and also strong cash flow generation. There was an agreement reached for the sale of the environmental services in Spain and Portugal for Enterprise value of EUR 1,133,000,000. We just announced that before market opening today. So this is part of the business in Spain, more on that later on the presentation. So after all this First half, we have a strong financial situation with a net cash position, ex infrastructure of EUR 1,859,000,000 euros €1,859,000,000 and a total liquidity ex infrastructure of €6,500,000,000 So we move into the operations and starting with the toll roads. We see that there was a very strong growth vis a vis Last year, as I mentioned in the opening, I mean, the restructures have been lifted in the U. S. And also toll Rates in the management's have been raised and also helped by a higher proportion of heavy vehicles. The U. S. Has a strong presence in these numbers. I mean, 77% of total road revenues and 92% of the EBITDA. We have assets under development that will come into, let's say, operation in the coming Months or years, I would like to highlight the NT 35 West segment 3C. I mean, you'll see in a minute the performance of these raw dealer segments, A and B, That's and go for a stretch of around 10 miles. This project will add 6.7 miles. It's a 66% addition Of a concession that ends in 2021, we are aiming to open at the end of 2023 With a pending investment of €73,000,000 I mean, you'll see the importance of this asset given that the catchment area It's very similar to the one of the previous two segments. So this project should add a lot of value. Also very important one is day 66 that is longer. It's 35 kilometers, 50 year concession. Construction is expected to finish at the end of 2032, 70% complete. And this project that is a big one is the one that is Driving most of the cash outflow in investment this year, in particular in the first half, EUR 150,000,000 were in this project, we still have a little bit more than 450 pending. And then we show others that are advancing well. Some of them are quite near completion. You can see all the data there. And Ruta Alcadis and Colombia's traffic risk, the other 3 are availabilities, right? So we can move to discuss more of the management's. Next slide. Here we see the traffic performance that I was mentioning in the opening. Of course, you have a big In February with the winter storm and also you had heavy rains in May, I think that it was something like 60% Higher, let's say, rainfall that in the previous year, and that affected But if we look into the end of the period, I mean, in June, as I mentioned in the opening, you can see traffic above 2019 levels pre pandemic. Not yet in the LBJ, but also the LBJ is kind of slowly catching up. Okay. So we move to the next one. Here, we can see a very important message. And as I mentioned, traffic is Recovering is at pre pandemic almost or pandemic levels, but look at the revenue performance. I mean, this shows That there is this capacity to change tariffs and adapt to the demand, optimize the revenue flow and the value of the assets, right? So if we move on to the next Slide, we can see also very interesting patterns emerging. And here, we compare In gray is the Q1 of 2021. In yellow, we see June 2021. And we have in a kind of blue between blue and gray, we have the pre COVID graph That refers to June 2021. So we can see some emerging patterns that are quite interesting. If we look into NTE 35 West and NTE, Of course, the afternoon traffic is clearly the peak is the higher. But we see that it I mean, there's quite a spread in terms of traffic distribution. We see that the midday is clearly above pre pandemic levels. And I would say that it's quite flat along the day in both assets. And as the economy grows, we We could probably see more of this. So peaks are spreading, and traffic is clearly on an excellent Performance, if on top of that, we add the ability to change prices And inflation as a tailwind, you can see the I mean, the prospects of these assets is excellent. Also, we have the I77, where we can see that kind of pattern, very similar. So midday is really performing well. And LBA has some catch up to do yet, but still we can see some similar patterns emerging. So peaks are spreading. Overall level of traffic is going to be quite interesting along the day. And this is a reflection of the more Logistics and commercial travel and also people taking use of flexibility, maybe work from home or Sort of changing patterns, but they are moving. I mean, they are just choosing to do that in a more varied way. Okay. So if we move into the next slide, We can see the more specific data where we see the growth in Transactions in NT, LPGA and 35 West, the growth in revenues ahead of that and of EBITDA Even higher. So you see the kind of margins that this is achieving. The traffic performance, really strong activity since the reopening in March 10, With heavy vehicles showing more resilience and a good example of the kind of Traffic levels we have is that we are achieving or I mean, running into mandatory mode events at even higher frequency than in February 2020, pre COVID. In the NT-thirty five West, we see the PM peaks that are above as we saw as you showed in the slides prior to this. Okay, so The usage of this is the reflections of what I commented before. Okay. We see the average revenue per Section on the right hand top side of the slide, we can see the level of increase that you can achieve, okay? So this flexibility in tariffs It's great in an area that is growing economically. So the region update is there at the Right, bottom corner of the slide. And you can see that the schools are not 100% in Per Sungier, I mean, there's really no restrictions in terms of opening of businesses and facilities, But still, you see that vaccination that advanced a lot and is Probably high compared to other regions. I mean, it's not as high as other countries as we see In a minute, right? So Canada that was lagging behind has overtaken these levels. And also, it's very important that Texas is leading the back to work Pause in the U. S. According to Castle Systems. If we move on to the next slide, we see the I77 that Clearly has done a very important catch up since reopening of the region. And you can see that traffic is now at the February 'twenty levels. And also, we have seen quite an increase in revenue per transaction. Okay. So in May 14 is when we saw really North Carolina lifting restrictions, so it's clearly a little bit behind Texas, but it's there. And we can see that now close to 60% of the population and this as the first dose in vaccination. So Moving on to the 407, we see the comparison to 2019 levels. And we've seen that it has been, let's say, subdued because there has been a lot of restrictions. And that's what we Reflect on the inside of the slide with all the different dates and restrictions, you see that throughout the first half, there has been a lot of restrictions. Now in July, we see reopening and we'll See more of the traffic performance when schools go back to in class education in September. The main The message here is that Canada is really overtaking other countries and leading probably Among the leaders in the world in terms of vaccination now with 70% to 80% with the first dose and 25% fully By July 16, and this keeps going. So probably this will leave a better situation of immunity that could enhance Mobility going forward. If we move on, we can see the traffic comparison, how, As I was mentioning in the opening, the last 7 days up to June July 20, sorry, And you have a 32% drop visavis2019, but as I said, it's slowly catching up. Vaccination is clearly the main driver of immunity and that could help mobility going forward. If we move on, please, we can see the financial data On the 407, the 407 published some days ago. And here, we can see how traffic has been Affected by all these restrictions, we've seen in the case an increase in the, let's say, revenue per trip And the tariffs have not been changed since February 2020. One of the messages that no dividend was paid in the first half of twenty twenty one. The performance for the second part Of the year should keep improving, and we see that the asset has a lot of liquidity, right? We see that it has close to The CAD 700,000,000 of cash and equivalents, and it has CAD 800,000,000 in undrawn Credit facility. So there's plenty of liquidity. There's, I mean, a few maturities coming up. You have EUR 18,000,000 in 2021. In 2032, it's close to CAD 300,000,000 in 2023, CAD 20,000,000. So It's a very benign maturity profile on an asset that has lots of liquidity and is recovering traffic. Okay. We also include here the Schedule 22 information that the Foro 7 has provided. Most of you will know this information, but it's good to keep it there for you to check if you need to check-in. So we move on to the next slide. We can see Heathrow's performance. Clearly, I mean, we published yesterday, you can see that the restrictions to travel have been Really impactful, and we can see that Heathrow has been doing a great job in Containing costs, optimizing revenue and optimizing CapEx, of course, always with the safety priorities. So CapEx has been constrained and focused on the safety one. And resilience, and it has been preparing the airport for a reopening. I mean, the pent up demand is there In July, when the government lifted restrictions to travel to other Countries without the need of a quarantine, if you were vaccinated, had a great uptick in traffic. I mean, we have to keep An eye on that, but clearly, Giselle prepared for that search on traffic, reopening Terminal 3 And also, opening T4 as a real list arrivals facility for people from the real list countries. Okay. So I mean, clearly affected Heathrow a great job in terms of cost controls. The outlook is probably the Important thing to mention now given that Heathrow has done its homework in terms of liquidity And cost containment, right? So regarding the outlook, I would just like to remind you of the latest investor report that points to 21.5 1,000,000 passengers, but there could be a case, a stress case or a scenario where you could go to the lower part of the range that is 13,000,000 And just in case that happens, it's not the base case, as I said, it's not his expectation. But if that happened, just preventing that waiver for the ICR Group covenant that Israel Finance was launched. Expansion, we still think it should happen. And clearly, the NPS It's lawful and Heathrow will reopen the interim property and hardship scheme and is Consulting with government, airline customers and regulators on the next steps because eventually, this should get done. Regarding regulation, there's not much to talk, but a lot is coming. Okay. So Heathrow asked for RAB restatement. It got a Minor interim adjustment of GBP 300,000,000 But I mean, the understanding is that Much more should be done. We'll have to wait to see how the CAA addresses H7 with all different considerations of RAB restatement and allowed return for the asset. As I said, no point in discussing now. Feedback will come in the fall. We'll update investors as things develop. Okay. So just remind you that the next regulatory period starts in January 2022, maybe there could be a potential gap, but it should start there. Okay. So moving into AES, the performance, again, has been affected by restrictions. The main news is that the Refinancing was successful and amend an extent of the debt facility going into June 2024. And here, there was additional commitment of funds in this refinancing, £20,000,000 that is 100 percent of shareholders injected £20,000,000 and there's another additional 30 Kopied, right. And the net external debt is left at £708,000,000 Okay. So a successful extension of refinancing and really waiting for the re In terms of traffic, probably worth mentioning that Aberdeen is performing better. And also Aberdeen, that is related not only to oil and gas, but To offshore wind has this sort of better relative performance. Again, there is pent up demand waiting To travel, right now, everything is affected by these restrictions. And also, we put in the slide some of the initiatives that the management has been doing to contain costs and CapEx. So we move on As we mentioned in the beginning, we had a strong showing, and we compare quite well to last year. Remember that last year, the first Quarter was affected by COVID with probably an EBIT impact of €44,000,000 This year has been better, of course, Leaning on BodyMax's strength with EBIT margin of 8.3%. Here, there was It's an extraordinary component because when the real estate division was sold, There was a release of the results of the Civil Works department with the Real Estate division that was reflected in this quarter. In terms of, say, we take this into account, the ordinary EBIT margin is 6.2%. That is Quite remarkable in the construction sector. We have studied in these numbers the contribution from the real estate business. In terms of asset sales, as I mentioned, different projects have been going on. The main one being the real estate that has been discussed Already, euros 330,000,000 post transaction cost in euros. Also, Rubixa was completed. This is €17,000,000 And we have Nalanda. This is another €17,000,000,000 This is a sale of a digital platform for documentation management for suppliers, and this was closed in July. And we have just pending some final approvals, also on availability concession in Figueres That was agreed for €41,000,000 and it's just about to be approved. That should be the case. We also have For the competition authorization, the hard Scott Rodino for the SEC business that is Agreed for $140,000,000 Okay. In terms of operating cash flow, clearly, as We mentioned in other conference calls the production advance in the U. S. And other countries means there's a cash drain From an operational point of view, the new businesses that have been closed, if you can come with you can get some, let's say, Non payments or, let's say, advanced payments could help in this in operating cash flow at year end. Otherwise, we should be consuming Cash in particular in the U. S, productivity cash flow is positive on the back of all these divestments. I was mentioning before the possibility of some advanced payments. Clearly, Awards have been higher than other years in these late months. And you can see that note in the backlog, we have some big projects like this I-thirty five in San Antonio, €1,300,000,000 or in Sydney Metro, That is €620,000,000 our Budapest contract for €630,000,000 So usually, that's quite higher than the Normal pending signing for the backlog. Okay. So if we move into Services, You can see that the comparison to 2020 is quite outstanding. It's a very good recovery in terms of revenues and EBITDA Margins, higher activities really across the board in the U. K. And Spain. In Spain, both TVs are growing revenues at EBITDA, environmental and infra environmental is the one that was Just agreed to sell and in price related to infrastructure maintenance, be it in civil works or hospitals. And it also has some additional businesses related to energy maintenance, lighting and so on. In terms of international, so we saw improvement in Chile and North America. In America, in particular, road maintenance is really performing well. And in Chile, remember that it's related to and services to mining companies. In terms of cash flow generation, also very strong, €184,000,000 with very good collection terms and activity. Cash flow that is €149,000,000 does not include any impact from asset divestments yet. Also, I'd like to mention waste treatment in the UK. As we said, we are keeping that For, let's say, some reshaping of the business and in particular, we are Looking at the potential to improve the York waste recovery plant, we are trying to Convince client and other potential clients of really treating more tons, so trying to buy Capacity here, because in the U. K. And in our places, there's waste going to landfills. And from an environmental point of view, we think we have I could proposition, right? So this is the kind of proposition that has been done to turn around some of these contracts, okay? So if we move on To the next slide, we have more information on these Numbers regarding the disposal of the environmental services in Spain and Portugal. Environmental services is mainly waste treatment and collection, also recycling of plastics. And This has been agreed to be sold to Press 0. That is a company from the source group. The Enterprise value is EUR 1,133,000,000 with an equity and value taken into account the balance sheet at The end of 2020 and equity value of €950,000,000 Here, we have some numbers For you to assess the transaction, the EBITDA for 2020 was €130 €1,000,000 This includes some EBITDA from projects around €29,000,000 euros of EBITDA that usually gets Dividends and this is the way we portray them in our results. And you can see that on a recurring basis, This €29,000,000 EBITDA produces something like €10,000,000 of dividends. Okay, so we expect closing of this to happen this year. We can move on to the next slide, please. And here, we have a Rundown of the main items of the P and L account. Well, the higher revenues These are really helped by all the divisions, construction and TONOS. Remember that we don't consolidate the airport's business, that is one. The one most affected by restrictions. EBITDA, it's also quite higher than last year, Close to 89%. And this is also help because last year, we took a provision for the restructuring of the support functions. In terms of financial expenses, it's very similar to the Q1 when I mentioned that In the infrastructure projects, we have the effect of The mark to market change on the inflation swap of Altena. Remember that Altena has pretty much negligible value For us, it has a book value of negative €135,000,000 So for it to be sold for, let's say, €1,000 it would have that sort of positive P and L impact. And then the Exinfra projects will have some additional cost is the impact of lower cash remuneration And higher average gross debt. The higher average gross debt should be sorted out with the repayment of €500,000,000 of a bond in midyear. So we should have more comparable gross debt in the remainder of the year to last year than this first They have, okay. So gross debt has been is going to be reduced slowly along the year. Then we have the equity accounted results. Here, we have lower The results in the 407 ETR that we already mentioned and then you have Heathrow with all the limitations In traffic affecting and in AGS, we also have an impact and it's basically for the Equity that has been injected in the company that is has to be provided, right? So We have now a 0 book value for Heathrow and AGS, and that should kind of freeze the impact of results until we recover above that yield value. In terms of net profits from discontinued operations, we have €208,000,000 and this is almost evenly split Between the impact of the real estate business divestment and the positive impact Of the Robial Services in Spain, remember that as long as you have offers as is the case with environment that are Above the fair value that you have in your books, you can keep recording these profits. That's the reason why We are recording them now. Now this we have some minor adjustment in international Services, some of them are related to the waste treatment that we discussed in York That we have tried to turn around, but we took the view of taking a provision and see if we can get the turnaround that I was mentioning of treating more That would be good for the environment. Okay. So we move on to the next slide. We see the cash flow evolution. So I will Comment on some of this breakdown. Well, the dividends from projects we already mentioned, mainly Coming from LBA and NT, then you have the working capital evolution that reduced in the 1st part of the year Happens is affected by construction, kind of unwinding some of the advanced payments at the end of last year. Then we have investments that are higher this year than the past, in particular with the I66 being invested Deployed, then you have divestments and shareholder remuneration when most of it is share buybacks. In other financing cash flows, the main impact is the deconsolidation of the cash from the real estate division at Budimex. So It has to be seen in conjunction with the number of divestments, right? Okay. So we end the Semester with the first half of the year with a very strong position of around €1,860,000,000 Okay. So if we move on to the sustainability part, Here, we will have a more detailed rundown of KPIs at year end. But I think it's worth mentioning some of the Different milestones achieved or awards. I already mentioned that we have 2 new independent board members, Female that I commented in the Q1 results. We also had at our ADM, our climate Strategy presented to shareholders that had a 96% vote in favor. We also published in our website the supplier code of edX. And our different businesses are also Launching their sustainability strategies, AGS in particular, there's a lot going on around Heathrow. I encourage you to visit that website where they have a lot of info on that. And then, of course, there's some awards for your per user. Then we can move on to the concluding remarks. And here, very important messages. In the past that the economic recovery and vaccination are very important to recover mobility And also, it's the flexibility in tariffs is proving very beneficial and with some sort of inflationary pressure More so, in airports, restrictions are still there, but we see some light of some Reopening pent up demand is there. We really need to get more vaccination and health passports working for more traffic to recover. Contracting is performing well. We cannot say it's affected by COVID now. It's performing well with good margins and excellent contribution From Budimex, in services disposal, we had a major step with the waste business in the Iberian Peninsula being Divested and the rest of the processes are ongoing. As I mentioned in The other conference calls, we want to have the most of them signed this year, even though closing could It's leading to next year, but we'll try to accelerate if the market is there after, let's say, the kind of COVID stoppage last year. And then we closed with a very strong financial situation, now help with dividends from the managed lanes and the asset divestments. I already mentioned some of the ones that will be coming in the second part of the year. Okay. So thanks for bearing with us, and let's open the Q and A session. Thank you, Ernesto. Could everybody please hold? The Q and A session will begin shortly. Thank you for holding. The first set of questions come from Alejandro Vigil from Westinberg. Please could you update us on the strategy to sell the remaining assets and services after the Spanish media's comment about a potential combination with other companies in Spain. Well, thanks, Alejandro, for the question. I'll take this one. This is Ernesto. Well, the remaining Services in Spain are related to infrastructure maintenance, I mean, from hospitals to roads, Grigus tunnels, it also had has other things like From energy efficiency parts, from lighting, it has a variety of services and capabilities that are Differentials. So we are open to different alternatives. We think that it could make sense given that the market is With quite a number of players, so market shares, even though we are one of the leading companies, we are short of 7%. So adding differential capabilities from a technical point of view and scale could make sense. So we are Open to that and the assets should grow. We should reduce our exposure, but should grow With the help of, as I said, these differential capabilities and also the possibility of platforms, why not? It could make sense. That's the only thing I can comment. Thank you, Ernesto. Also from Alejandro, could you comment on the use from the sale and priorities in terms of reinvestment versus dividends? Okay. Here, we remain saying that the preference for management is to create Value with industrial investment, we know that we are kind of advancing with sales and generating cash and maybe not Investing that much, but the whole company is working on different strategic initiatives from the Horizon 24 plan, And we expect to deliver. So if there's a preference, there's a preference for that. But of course, always keeping an eye on balancing With remuneration to shareholders. Then last question from Alejandro. When do you expect Ferrovial dividends to its shareholders to return to pre COVID-nineteen levels? Well, we'll have to see. The board is looking at that. No decision yet. I mean, that will come probably more updating the next quarter or at year end results. But he's looking at the Pipeline, the different opportunities and also the results. So no decision yet, but we are on the path to that. Thank you, Ernesto. The next set of questions come from Charles Maynard from Kempen. How much roughly does Portugal represent from the €130,000,000 EBITDA of the environmental services which is being sold. Is this part included in the international segment that you report? Okay, Sanjay. It's quite small. I mean, it's, I would say slightly below €6,000,000 of EBITDA, like €5,600,000 or something like that, if I Recall correctly. And just previously, it was reported in the international supporting the international part of the business. Thank you. Ernesto also from Charles. What is the book value of the business that remains after the transaction? Well, the book value for the total This was just north of EUR 1,000,000,000 like EUR 1,030,000,000. The one that has been agreed Environmental Services in Spain and Portugal has a book value at the end of 2020 Of €600,000,000 right? So just doing the simple math, the remaining is €413,000,000 Thank you, Ernesto. So from Charles, post This divestment, what type of activities do you have left in Spanish services? Okay. Well, as I said in a prior Question, the main ones are infrastructure maintenance. That means an integral Approach to buildings, hospitals, industrial maintenance, also infrastructure maintenance like roads, Bridges, Thanos. And you also have other additional services that are related to Optimization from an energy point of view, lighting, that sort of thing, right? So the main ones are the ones That I mentioned even though there's some other minor activities. Thank you, Ernesto. And finally from Charles, What is the status on the rest of the sale for services? Can we expect any news flow soon? Okay. So yes, we have a variety of processes here And well, also some activities, for instance, in the services portfolio, There was a concession that is a shadow toll that is called the A2 Arabia. As I said, it comes with A maintenance contract, but the main value driver is this Shadow Toll concession. This Shadow Toll concession Has an EBITDA of around €30,000,000 give or take at more or less €30,000,000 Right, in 2019 and on a non COVID, but it's quite resilient. As I said, it's a shadow toll. Given that it's a shadow toll concession, We think it fits more with Sintra rather than being sold. So that part is Some carve out for Sintra. We will see it with Sintra going forward. As I said, this is a shadow at all. Then the infrastructure services for maintenance, maintenance of infrastructure in Spain is another process. Then we have one in Chile and then the other one is maintenance In the U. S, and of course, we have AMI that has main AMI, the core, And also has a separate process that is for, let's say, utilities maintenance. Okay. So we have a variety of them. And as I mentioned, also waste treatment in the UK that is being, Let's say, over hold and we'll come to the market later on. The others that I mentioned are all Scheduled to be kind of signed in 2021. Thank you, Ernesto. The next set of questions come from Luis Prieto from Kepler Cheuvreux. Can you give us any update on the high complexity concession pipeline in North America? Are you detecting increased competition in those projects in which you would be interested. Thanks, Sigona. And thank you, Luis, This is Pedro Rosada from Fintra. We are keep on following the market with The feeling positive to see new opportunities coming to the market with respect to high complexity It's a little bit soon, but we know that some of the DOTs, as the one that has been announced from Georgia are planning to bring new high complexity projects to the markets. And we know that In the short and medium term, some of the DOTs are going to bring back also some of these projects. With respect To competition, it depends on the type of the projects. If we are talking about these high complexity greenfield projects, Managed lanes, dynamic tolling, there's not too many out there, the usual suspects, and we don't see Too much competition. As you know, we feel that we have still high competitive advantages to understand much better this type of projects. So but we don't see too many players coming soon to these complex projects. Now there are some other type of projects as the ones that we have been prequalified already in Miami Or I10, Tarcassius in Louisiana and working on the prequalification Of the Pennsylvania bridges where there are different risk profile and potentially we can see Other type of competitors or more competition coming from both infra funds and developers as well as construction companies. Thank you. Thank you, Pedro. The next question also from Luis. What is your view on the current iteration of Biden's infrastructure plan proposal now that it seems that 3 Ps or PPP approach could be explored in order to finance some of the projects? Thank you, Luis, again. We see The Biden's infrastructure plan, quite optimistic and very good news for our company. As we have said many times, at the end of the day, the final decision used to come from the Federal governments are the ones that needs the political bill light to go on with the projects. But From the Telfer government, they could provide some critical help from the developments of Many projects, as with the TIFIA program and other flexible financing and that kind of stuff, that definitely could boost The final stage of the projects to make them available and to make them Profitable for the developers and at the end of the day, to make them possible. So that's the main idea from us behind this central government's support. Perhaps it's too premature because we don't have the exact details of that plan. Thank you, Pedro. The next set of questions come from Elodie Rall from JPMorgan. Explain that traffic on LBJ is still lagging compared to 2019 levels despite Texas reopening. Do you see risks on the structural impact of the toll road specifically? Thank you, Begona. Hi, Elodie. This is Pedro Lozada again. Thanks for your question. Let me start with the second one. We definitely don't see any structural problem in this road. We As we have said, and we are keep on improving in things like vaccination, economic recovery From GDP perspective in the area, unemployment rates. But it's true that there's some differences between the BJ and the NT 35 West, some of them are the ones that is impacting more in the performance and the speed of that performance with respect To the other ones, things like the proportion of white collar workers with the ability to work from home higher among the LVA users Done in the NTE areas. More demand lag due to less density, vehicles per mile recovery on LVJ general purpose lanes compared to NT and NT3 and perhaps also Lower proportion of trucks in the LVT. Remember that also it's been impacted by construction works on the 635 East, that is going to have some negative impact probably In the coming years, during the construction and positive one in the long run. As soon as we Recover traffic, particularly on the peak hours, the revenue per transaction will increase. And we will see probably some acceleration on the LPGA recovery. That recovery is that will be driven by return to office In that particular area and in Dallas particularly, most offices are planning to full or hybrid open in fall 2021. And also, many school districts have announced that this next school year, starting at the end of August, will be 100% in person. So again, coming back to the argument of the increase in revenue transaction and the increase in traffic in peak hours, Help us to understand that we need to feel a little bit more positive on LPGA. Thank you, Pedro. And last question from Elodie. Given your comments on likely recovery in the second half at the 407 ETR and the strong liquidity position at the assets, can we expect the 407 to pay a dividend in the 3rd quarter? Or do you think the Q4 is more realistic? Thank you, Elodie. Thanks for the question. I think that what we have shown in this presentation is that as soon as Restrictions are lifted. We are showing a quite accelerated recovery from the Flow 7 With respect to 2019, we are still under Stage 3 that will end probably In mid August. So after all the restrictions are lifted, it's probably the right time to evaluate when The company is ready to distribute dividends. Good news is that an acceleration on the recovery and the Better performance in the Q1 of the year and also a good and healthy Liquidity position that give us the opportunity to do so by the end of the year. I don't know if it's going to be in the Q3 or Q4, but now that We feel optimistic also with that we are in compliance with the debt service quota ratio and the rest of the Covenants that we need to comply to distribute dividends and having the cash in our account, we believe that we I'm going to be able to distribute dividends, but not sure yet it's going to be Q3 or Q4. Thank you. Thank you, Pedro. The next set of questions come from Jose Manuel Arroyes from Banco Santander. First question, Dallas It's showing that traffic patterns are changing, with morning peak hours flattening, but afternoon peak hours becoming more meaningful than pre COVID. Is it reasonable to assume that a similar traffic pattern could materialize in Ontario 407 ETR post restrictions? And if so, how would this impact the 407 ETR in terms of meeting scheduled 22 traffic thresholds? This is Pedro. It's true that we see some changes in traffic patterns with respect to Peak hours and AM, PM traffic, it's true also that we are seeing these different Traffic patterns with some of the restrictions still there, for example, with respect to schools And offices, when it comes to your question on whether it could materialize in Ontario and whether it could have an impact on Schedule 'twenty two, I would like to remember the way it's measured, the Schedule 'twenty two, And it's based on the highest 2 peak hours of every segment independently, if they're calling the AM or PM peak. If the PMP are now higher than the AM, they will be the ones used for the square 'twenty two calculations, then having a neutral impact. Actually, I remember it properly, most of the average segments' flow rate We're calculated with the PMP covers as the highest values. Thank you, Pedro. The last question from Jose Manuel. Raw material prices inflation, how concerned are you about rising raw material costs hurting construction margins in the foreseeable future and what can be done to offset this inflation. Thank you, Begonia, and thank you, Jose Manuel. This is Ignacio Garcia from Construction. Yes, actually, we are seeing increases in In prices in raw materials like bitumen, cement or steel, and we are constantly monitoring This is in our main markets, U. S, Poland and Spain. But as you know, these impacts are very regional. I mean, I'm very specific in each one of the areas. So whatever you see, I mean, cannot be extrapolated from one area to another. But the way we monitor this is in 2 ways. I mean, first, in our backlog. And of course, as you know, in Spain and Poland, there are indexation formulas with public administrations, which limit The impact of this inflation. But also, I mean, in the early stages of February, we tried to close long term contracts With our suppliers, no? So somehow the prices are fixed in most of our backlog, and we don't expect a huge impact In our backlog, no? And regarding new contracts, Fagro Realis is using quite advanced tools To better estimate this inflation, we are using data analytics and also artificial intelligence in every new bit, I mean, that we are bidding. So, well, all these new contracts are factoring these Increases in prices. So we believe that All the new contracts and those that you have seen that are not now included in the backlog have considered this from the even from the early stages of the design. Thank you. Thank you, Inaki. The next question comes from Filipe Leite from CaixaBank. At EBITDA, the line Others recorded minus €13,000,000 in the first half of twenty twenty one versus plus €15,000,000 in the Q1 of 2021. What is the reason for such a difference in the Q2? Thanks, Begona and Filipe. Well, here, there's 2 main items that changed from plus 15 to minus 13. And one of them I already mentioned is the provision for the waste treatment yoke plant. That is like €12,000,000 And then there's another provision of €15,000,000 Because there has been an agreement regarding the SH 130 litigation, and we've Taking that in others ahead of the signing. Thank you. And so the next set of questions come from Nabil Ahmed from Barclays. First question, on the managed lanes, Since traffic is broadly back to pre pandemic levels, could you please maybe elaborate on the mix? Are heavy vehicles much higher and cars may be still well below pre pandemic levels. And therefore, is the average revenue per transaction still strongly influenced by this mix? Can you please give us an idea of average revenue per transaction versus 2019 excluding the vehicle mix? Thank you. Thanks, Avile. The heavy vehicles has grown versus pre pandemic. Light vehicles are also at the same levels as pre pandemics, except On the AAM peak, and we are expecting to recover that traffic once Offices and the schools are hopefully back in September. With respect to the mix, we do not provide that breakdown, but we can So the last part of your question with respect to the comparison with 2019 and that mix With respect to the revenue per transaction versus 2019, it's kind of 1 third from the mix of vehicles and 2 thirds comes from toll rate increases. Thank you. Thank you, Pedro. Also from Nabil, about Schedule 22, could you please provide details as to what exactly triggers the end of a first measure event? Does the 407 ETR need to recover to pre pandemic traffic of the majority of the network or all of the sections and for how long? And what is the pre pandemic reference exactly? Thank you. Thanks, Avile. The company in the previous agreed The 4th major event terminates when the traffic volumes on Highway 407 reached pre pandemic levels measure as an average of 2017 to 2019, For the 7 and the interchanges. Or when there is an increase in toll rates or user charges. That's basically the agreement that we have reached. And if any of those two things happens upon the The termination of the 4th major event, the company will be subject to scheduled 22 payments commenced in the subsequent year. Thank you. Thank you, Pedro. The last question from Nabil. Net working capital consumption seems to be lower than the seasonal drag that we have seen before. What is the reason for this? Well, in general, I would say that the Collection performance or days of sales outstanding in the Services division has been outstanding. I would say that in construction is more similar to what we've seen in other places. But in general, we see that public clients are really Paying well, I mean, better than in the past. So probably there's kind of a trend for Keeping that sort of liquidity and good payment terms, that has been the main help. Also in services in the UK, We were expecting to have to pay back some of the VAT and other taxes that were delayed last year. That also has been postponed, so that has also helped. But I would say that the main component is Good, very short days of sales outstanding in general. Thank you. The next set of questions come from Tobias Werner from Stifel. First question, can you give us a bit more color on the opening steps in Canada also in terms of dates? Thank you. Thanks, Tobias. Well, Canati started the in 3 different stages, The reopening started in June 2, as far as I recall. We started a few days ago The final stage of the reopening ending in mid August. So after that, we are hoping to see almost full reopening of the country, assuming that also Schools are going to be open 100% physically and also hopefully to see a lot of Thank you, Pedro. The next question also from Tobias. The 2.4% construction margin would be where when adjusted for all of the one off effects. Thank you, Tobias. Inaki, again. Just to be clear, the 2.4% in EBIT doesn't include any Surplus of the divestments of Urbixa or the real estate business of Udimiix. So the only one off effect included in the number is what Ernesto mentioned at the beginning. That is the EUR 15,000,000 Margin with the real estate business that was adjusted in the consolidation, once the business has been sold, must be included in the construction business. So excluding this €50,000,000 the €2,400,000,000 will be around the 1.9 percent EBIT, I mean, so in the trend of the 3.5 That we will get in Horizon 24 in 2024. Thank you. Thank you, Inaki. The next set of questions come from Patrick Croussett from Goldman Sachs. How do you intend to use your significant net cash position, especially including the announced divestment proceeds? And what is the scope for increased shareholder remuneration and potential timing for a clearer dividend buyback policy? Thanks, Begona. Thanks, Patrick. Well, here, the preference that I mentioned Before we said to create value from an industrial investment point of view, of course, that value creation It gets reflected in the increased shareholder distribution a long time. Being specific now is Something we're doing, we're looking at different things and potential for investment on the wake of the Pandemic and we cannot be more specific at the moment. We'll try to provide more clarity as we clinch investments and materialize the Thank you. The next set of questions come from Martin Wodgau from Bank of America. First question, what is your dividend policy for the NT and LBJ? Will they distribute 100% of their free cash flow? Thanks, Martin. We don't have a dividend policy for On NTNIDER, LBJ, we need to comply with the financial covenants when we pay the debt service that Comes under the months of June December. And based on the performance of the assets and the Decision of the BOD, the Board of Directors, we decide on the levers of dividends to be distributed, but there's no dividend policy per se. Thank you. Thank you, Pedro. Also from Marcin, do you expect any of the cost savings that have been achieved in your toll roads in the last 18 months to become permanent? Thank you, Martin. We constantly looked For efficiencies in our operations, but as traffic recovers, most of the traffic related costs should go back to Pre pandemic levels. There's different scenarios in different Asset is not the same for all of them, but I would say that it will be the broad answer to your question. Thanks. Thank you. The next sort of question comes from Alexis Bila from Schoenfeld. First question, could we see price increases in the 407 ETR already in 2022? Thanks, Alexis, for your question. Remember that as we have explained, the way it works with respect to the force majeure event that give us The possibility not to enter into any scheduled 'twenty two payments also is related to our ability to increase Prices, perhaps it's too soon to understand whether we are ready to increase prices in 2022 and then face Potential Schedule 22 payments, but we are constantly monitoring traffic performance in the facility and main alternatives and making estimates of the Schedule 22 payments, as I mentioned before. If we see that there is a market value on increasing toll rates versus accepting Schedule 22 payments, It will be analyzed and obviously considered. Thank you. Thank you, Pedro. The last question from Alexis. Could you give us some visibility on greenfield or brownfield projects or M and A pipeline over the next 6 months? Thank you. Hi, Nicolas. This is Pedro. I'm going to give you some Brief or additional visibility on the already mentioned with respect to Our pipeline in the U. S, I mentioned some of the projects that we have been prequalified in Florida, in Louisiana, Trying to find those who are prequalified in Pennsylvania and waiting For other high complexity projects coming up in the form of the balance lanes from some of other States, we are quite positive that, that is going to happen. Outside U. S, We are following also opportunities in Latin, particularly in Peru and Colombia with access Those are our Ruta Setentarios 78 as well as other projects in Europe, Particularly in the UK and some other alternatives in Australia that has been Also core market outside our primarily market, which is North America, and we are holding To we are operating 2 different concessions there in Australia. Let me Give the floor to Inaki to comment on the rest of the pipeline. Thank you. Yes, more than the pipeline. Regarding M and A transactions, and I think it was mentioned In the previous conference call, we are looking carefully, I mean, to bolt on opportunities in water and construction, particularly in the Of the U. S. And also we mentioned that Budimex taking part of the proceeds of the sale of Udimes and Eurocomosi, we are thinking in expanding probably in FFS service, I mean, the service But also analyzing opportunities in energy and maybe looking to other opportunities in closer Markets or closer countries to Poland. Thank you. Alexis, this is Ignacio Castellan from Florida Airports. Just a few comments from my side on your question on pipeline. Just to confirm that we are monitoring the market, There are opportunities on global basis. We are indeed working on 4 projects. Additionally, we are doing preliminary work In several projects, that's once the vaccination progresses for COVID, this should be unwinding. With respect to specific opportunities, Brazil is producing a very active pipeline To privatizations and potential retainers, and we are also following opportunities in Asia, Turkey and the U. S. Should the opportunity arise? Thank you. Thank you very much, and thank you, everybody. There are no further questions. Thank you. Well, thank you all for bearing with us. I think we keep delivering on the milestones that we set ourselves to do. And