Earnings Call: Q2 2019

Jul 30, 2019

Good afternoon, everybody, and welcome to Ferrovia's conference call for the 2019 first half results. Both the result report and the presentation are available to you in our website. If you have any questions, you may ask them through the form included in this webcast through an email to our irferrogl.com or via this conference call in the Q And A session at the end of the call. With this, I will hand over Ernesto Lopez Motto, Ferrobiall CFO, who will be leading the call. You, Ricardo. Good afternoon, and thank you for attending this call. First, we'll start with the highlights of the first half. We have the strong performance of the 407 ETR with a EBITDA growth above 7%. And the traffic impacted by worse weather conditions compared to last year. I mean, we can update you that July looking better, we have to monitor the traffic throughout the year, solid performance, as I mentioned. Regarding the managed lanes in Texas, performance was boosted by new connections in the Dallas Fort Worth area. And we have very solid growth in terms of financial results above of growth in traffic. In Heathrow, we have record traffic of 38,800,000 passengers, which is 1.8% up from last year. And we have the expansion master plan consultation on Longway III already launched. In construction, we registered a provision in the first quarter of 1,000,000 at 100% for projects in the U. S. Expected losses. In the second quarter, there have been some slight additional losses in projects that are outside the U. S. And now we are working on execution. Concentrating focus and, looking at, improving all the bidding and performance. Moving on to the different areas, into toll roads in the next slide. We see that, managed lanes are driving the outstanding EBITDA growth of the division, 47% in like for like terms. With more than 60% coming from the U. S. Also an idea of the performance and quality of the assets was the sale of household for Bjal reached an agreement to sell 65% of household for 1,000,000. And agreed a call and put option for the remaining stake, 15% remaining. The equity value, extrapolating of 100 percent equity value would be 1,000,000. That is around 60% above the analyst evaluations. The deal when closed, that is expected before year end, we should record a capital gain of 1,000,000. And this includes the fair value adjustment for the stake. We keep ahead of any call or put execution. The cash is expected to be received before year end. As I mentioned, the closing should be before year end. The transaction is just subject to the customary regulatory consents and approvals. So, no further impact beyond this in terms of the P and L or cash flow in these results. No impact in these results, as I said. Okay. So if we move on to the specifics of the 407 ETR. In the next slide, we, I would like to focus on the following points. Performance in the 2nd quarter has been very solid with EBITDA, 8.9% higher. Despite rain and colder weather. And, this is, of course, on top of the first quarter also so that kind of effect. When we look into the profitability, we have to bear in mind that in 2018, OpEx was impacted by a favorable effect of a one time recovery of indirect taxes. So, OpEx really is only growing at an underlying rate of 1.1%. Well, the margins are great. You see that the 2nd quarter is around 89% EBITDA margin. Always, there seasonal effect and the first quarter is lower in margin than the second. In terms of the first half figures, The other thing I would like to mention is that we are recording longer average, triple lens. That is helping. And in July, as I said, in the introduction, it's showing also good, good results. Dividends grew by 10.5 percent. So the total for the asset, was 500 1,000,000 Canadian dollars. And the July board meeting approved the 3rd quarter dividend of CAD 250,000,000. Okay. So the asset keeps being in the delivering mood. It shows a very strong financial position. Finally, for Abial, as we mentioned before, he's interested in exercising the right of, first refusal for a 5.2% stake in the 407 ETR. That SNC Lavalan is selling. Do you know that this exercise is subject of, judicial resolution for interpretation of the, contract among the different parties. We had the 1st hearing in June, and we don't have visibility as to when it can be resolved. Okay. If the resolution is finally in our favor, we should have a cash outflow of around CAD 1,600,000,000 for this, for this stake. Okay. If we, move on to have a little bit more color on the weather I was, I was mentioning, you can see in the comparison between last year and this one that the conditions were clearly worse. I mean, 1st, during the first quarter, there was severe severe weather events that took place involving freezing rain and snowfall, 5,000,000 of winters called closure days, that implied by cancellations. And there was none of nothing of this in the previous year. And also, days with freezing rain that also keeps traffic down. In the second quarter, also there was heavier rain and, and and call this weather in in general. But the, I mean, I don't want to focus solely on on weather, weather has played a major role for sure. Also, we are seeing economy, a touch, softer, having business and consumer confidence is lower. So probably the growth in GDP will be lower this year than initially forecast in the region. But as I said, the outlook in July is looking good, probably July will be the best ever. So we will keep monitoring that. The dynamics of the asset keep being phenomenal in summary is placed where business and population grow in the area. Okay, so we can move on now to, other parts of, the total road division, Sintra, and the next slide shows the outstanding performance of the managed lease in in Texas. In the second quarter, we see that the NMT grew by 42% and will be gave by, 21% in local terms. And we see that the North Texas economy remains strong and diversified and continues to outperform in the larger US economy. On employment, during Dallas, Fort Worth is at its lowest level since the spring 1999, it dipped below 3%. And the state rate is 3.5% and the overall country is 3.6%. And it's a 5 decade low. The corridor is really key from a commercial point of view. The I-thirty 5 West is connects Mexico and Texas is the more direct north south connection for long haul trips and that we have to look at the area in more detail and talk about the Alliance area development and these are very important logistics center to the north of Fort Worth, Managed Hughes Companies And Logistics Companies are and located there. We have, the logistics centers and warehouses from Kraft Foods, JCPenney, FedEx, Walmart, and ALD, and also Amazon has 2 fulfillment centers in the north and south of the airport. Among other many centers that we see in the area and we keep seeing commercial traffic outperforming In terms of real estate, also Fort Worth is a city that is spread into north and more much of that land is owned by Alliance, Hillwood, And this strong population growth is expected in the region and should translate into a significant increase in traffic over NT35 versus in the long term. In the first half of twenty nineteen, rather than the quarter, NTE EBITDA grew by 40 5%, benefiting from the opening last year of the NT35 West and the SH 183 that connects to the east, to Dallas directly, I mean, the NT segment to connect to that. Also, EBITDA EBITDA grew by 24% boosted by High traffic in segment 1, to the words that is also the one that connects with SH 183. Okay. So, the growth in the LBA is lower than the NTE because the segments to the east run into congestion. I mean, as I mentioned in previous calls, the works for that should take place along the coming years and eventually, ease that congestion point and then should, mean that, the value the of the asset and the growth should resume in earnest there. In terms of, all the connections that are happening, and this is the main point I want to to, to mention and then move on to, the managed lane most recently opened on the next slide. That is the I seventy 7. K. So the 877, even though we don't end this a partial opening, still, segments to go, but the partial opening already shows that the, corridor is improving with the opening of the asset. Average speed in the morning peak up by 18% in the corridor, and the afternoon peak also improves by 37%. K. So the highway volumes have quickly recovered the preconstruction levels. We are applying discounted promotional rates, and the management's traffic is growing at 20% in each of the 1st 4 weeks of operation. Transferred penetration here is lower than in other regions. We're talking about 40% of users with the transponder. Okay. So, we have also included a a video link so you can get more information on on the asset. As I said, and we will be updating more when we open. And after some years of operation, we can discuss more how it looks vis a vis our perceptions so far. It's fine. Okay. So now is the turn to move, onto airports. And, well, Heathrow already published, so I will just focus on a couple of, office lights here. The record high numbers in passengers that take you through our chiefs with record passengers in the first half 1.8% up from last year and also retail revenues And following that growth, we had 3.4% increase. In terms of financial performance, it's robust. The passenger growth and retail performance helped generate a 4% increase in revenues. And then the adjusted EBITDA group by 7%. Of course, this is boosted by the implementation of the IFRS 16. If we exclude that impact that brings lower operating costs, the growth in EBITDA would have been 3.99%. In terms of aeronautical revenues by higher traffic, growth, in particular in non haul, it's benefiting also from recovery from prior yields, the dilution in prior years. And the aeronautical revenue per PAX is at £22.48 at the moment. Adjusted EBITDA that I mentioned grows at 7%, the exact number of lease costs operating leases in the past that we have taken out is £36,000,000 now this goes to the amortization and financial cost line. So the net impact is not a meaningful. In terms of dividends, Heathrow paid out in the first half, GBP 200,000,000. This compares to GBP 228,000,000 pounds last year, so it's lower. But, it's just waiting to see how the traffic and the performance evolves ahead of, Brexit. I think that from an operational point of view, airlines are in much better shape than what we initially forecasted, but we have to wait to see how this, how this evolves. In terms of expansion moving on to the next slide, we talk about sustainability and Heathrow is advancing on his Heathrow 2.0 sustainability plan, which has 3 main targets. Carbon neutral airport operations from 2020, 0 carbon airport operations by 2050 and carbon neutral growth from the new runway. Among the achievements reached by the airport, I would highlight, Heathrow is in line to have its entire fleet of cars and vans electric or plug in hybrids by 2020. It has over 100 electric vehicle charging points today. This is the end of 2018, and 72 electric and plug in hybrid vehicles in the split. 60% of movements by aircraft are in the quietest category. Heathrow is incentivizing quieter, led to an aircraft by airlines and has offered at year's free landing for the 1st electric aircraft to operate commercially viable side from Heathrow. T2 Terminal 2 is entirely powered by Renewal Energy. Okay. So now let's move on to the next business that is construction. And as we announced last quarter, we took a provision of 3 €45,000,000 for, future losses in, in used projects. In the first half, we have recorded an EBIT for the whole division of 1,000,000. That is slightly below the 332 recorded in the first quarter. This is linked to, of course, very strict cost recognition, prudent recognition, We have carried out a number of, negative adjustments at Ferbio Roman level, and these adjustments relate to We're expanding sign off insurance claims and compensation events. So we are taking the cost. We are not recording any revenue for this. Also, this is more technical costs related to central overhead costs are distributed to individual projects. When you take a provision for future losses, There was an interpretation of IFRS from a high frequency on the costs that you can include in this calculation. And you can only take into account costs, specifically related to the project, not overheads that are usually absorbed by by a fee in our business. Here, the impact will remain as long as we don't have other projects that absorb the fee or we take some efficiencies to reduce the amount. So new backlog that will be coming in, we'd say better prospects and we will talk about them when we close them in the second part of the year should help too is this, this workload. And also anticipating, one of the questions regarding the performance of construction, what could be expected for the whole year? I mean, we can say that, it should be around these levels. So, the 2nd part of the year should bring for the whole division. Or worsening. That's our best estimate. And now, of course, there's opportunities and risks in this, but it should be fairly assessed. Okay. So, if we move on to, services here, of course, you know, that it has been, discipline classified as a discontinued activity. But I guess it's worth just stopping to talk about the divestment process. And also an update on the performance of the business while it is being sold. And well, we have 2 separate sale processes. That is something that probably was not decided beforehand, but Amy has been engaged in, discussions and negotiations to exceed the long term contract with the Birmingham City Council. And, the now that it has been sorted out with the risk and clean exit is working on the diligence preparations. The momentum of the other part of the business, Spain, but spectrum and the international part of the rest of the world. Is finalizing due diligence and should have binding offers coming. So, we should then slow the momentum of that part just to wait for the Amy, the Amy process. In terms of the, the Birmingham agreement, Well, this deal has no impact on the P and Ls of the group at a consolidated level. In terms of the exit agreement by EMEA is to pay £215,000,000 100 of them already took place in the first half. So you will see that is affecting our cash flow number. And there's 30,000,000 installments, a couple of them this year, September and end of the year. The total for 2019 will be 160. And then you have 55,000,000 pounds over the next 6 years. It's basically payments of 10 years, except for the last one that is 5,000,000 at the end of the 1st 6 months of the 6th year. Okay. In terms of operations, it will remain operating the contract and the, let's say, the maximum date of operation for this, if the client extensive would be the end of March 2020. Otherwise, it would end in September. Okay. So if we look at the performance of the division, it's quite robust. We have revenue, of growing 11%, EBITDA 9%, And we have a lower order book, basically, because we have taken out the Birmingham city council project figures. Spain is up 3% in revenues and EBITDA 5 percent profitability and expansion a driven by a more tons of waste treatment. In UK, revenue is growing a lot with a stable EBITDA margin. It's growing 23% as I said, with a stable EBITDA margin. In terms of broader spectrum, And revenues are slightly down 4% on a portfolio streamlining, but it's improving the performance at the end of the 6 and with the 6 months. In terms of international, clearly the start of the portfolio with revenues growing by 31%, and with EBITDA and profitability expansion, you have a 7.7 percent margin versus 4.5% in the first half of twenty eighteen. And the order book is growing thanks to road maintenance contracts in North America. Okay, so moving on from and this services division into the detailed P and L, And we have the, following main figures at the consolidated level. We have revenues, that are down by 5.3% with lower contribution from construction that is declining 8.6%. EBITDA impacted by the provision I mentioned, but also helped by IFRS 16, that is improving with a reduction of operating cost of 1,000,000. So it's fairly small in the continued activities report, only 1,616,000,000. Then, depreciation is growing because of the IFRS 16,000,000 impact that I mentioned before. In terms of, impairments is really the prudent approach we are taking to our network in the Ottema toll road, you know, the Ottoma toll road is, in, in a process claiming a restatement of the conditions prior to the unilateral change of the conditions of the concession But, in the meantime, until that is out, we keep providing for the the networks of that, of that toll road. In terms of financial results, at the infrastructure level, we see higher expenses, but this is due to, having, the activity with NTA 35 West that before opening was activating, capitalizing financial costs. Then, infra projects have a positive evolution, also health by, hedges on the, on the share price, the health by the performance of the share price. In terms of equity accounted results, the main comments is probably with with Heathrow, the 407 is 1,000,000 higher than last year. Heathrow is lower than last, a year, pretty much breaking even. And this is affected by the current move in the inflation curves. So, in terms of, the growth of the asset and the delevering. This is great news, because if that inflation that has gone up close to 4% in the curve, in the next 3 years should be boosting the performance of Heathrow and delivering said in the coming 3 years, if it materializes. I mean, this is a bit of a movement with all the talks about a potential no deal. Then, in taxes, I won't extend my self is pretty much on the on online you look at the difference in and out of our 19 percent, corporate tax rate, if you take into account the different ones around the world, And then, do you have the net profit of discontinued operations I'd like to mention is also helped by, the non amortization due to IFRS 5 when you classified a discontinued operation for sale, you don't amortize the asset and that is helping the result. In the end, we have, net income was just minus 6. And, should be recovering the 2nd part of the year, as I mentioned, helped by the disposal of households, capital gain and the improvement of the business. If we move into the net cash position evolution, we have, excluding infrastructure projects, we posted a million of net cash versus $1,200,000,000 at the end of 2018. And the main drivers of this change in the position. First, we have the dividends from projects, 244 compared to 307 last year. Here, I should point out that last year there was an €81,000,000 dividend from concessions from the services project. And in the first half of twenty nineteen, if you take that effect, our dividends from toll roads are increasing by 10%. Here we should also mention, again, that at the end of the year, we expect a dividend from NTE. And then, the operations are looking good. Probably, we would have we should have good positive surprise and the dividend from this, from this toll road. And then of course, we will also be, looking at the potential, from, both in Heathrow and the 407. Because both assets could be delevering more than expected, okay? So we will have to keep an eye on that possibility. And, then we move into the operational cash flow from X infra projects, we have the negative EBITDA impacted by construction provision of 345. Of this provision, the cash outflow has been 56,000,000, in euros. In terms of the rest of the working capital evolution, we have the, and seasonal consumption at, and also Amy X Boomingham. This is a Boomingham cash outflow was 142,000,000, and this is a combination of the operational cost of that contract in this 1st 6 months and the payment of the settlement, the first payment that is £100,000,000. Okay. So, really in the rest of the year, we should have, as I mentioned before, another 60,000,000 from this, from this settlement. Also, in terms of investments, we invested more this year than the last million versus EUR 87,000,000 with no significant divestments. And please remember that Absol will come should be coming in the second part of the year. Okay. So, I mean, the rest is not worth mentioning the rest of the captions. Of the cash flow evolution, and we should be moving them to the final remarks ahead of the Q and a session. In terms of, and management performance, just highlight the continued boom of those assets. In Hydro, a new record high, supported by higher passenger satisfaction. Important to mention that with the comparables, then the household transaction with a price 60% above consensus, has shown the market appetite for infrastructure assets and probably the kind of decompression we are seen, all over the world and the kind of required return that financial players have for these assets. Then 407 ETR has posted a solid performance with, EBITDA 7% up and dividends growing 10.5%. Despite weather affecting the traffic, okay? Then we have the net cash position of $182,000,000 euros before positive inflows expected. And we are not talking here about the services divestment that probably will materialize in 2020 because of the needed regulatory approvals. And finally, regarding construction, we are working to improve the outlook here. I mean, the focus on risk is top priority. And we are looking for this division to help acquire high value infrastructure assets with a good balance of risks at the risk construction. And, finally, the binding offers for the services division are coming, exceeding me that will take a little bit longer. So, that's the whole run down. I was planning to make, and we move on to the Q And A session, we have some questions that have come in in writing. So I would take the opportunity to maybe start with, with those ones. Okay. So the first question we have received in writing comes from Olivia Peters at Macquarie. The first one is, can we have an update on the timing of the services disposal and your priorities for the use of the proceeds? Well, I already covered that on the presentation. The diligence has been finalized and we should be getting binding offers in the coming weeks. Okay. So It's looking in good shape. You just have proceeds nothing different from what we mentioned in the past priority to invest in value creating infrastructure, we could have other juices like shareholder remuneration or even debt reduction, but the priority, as I said, is investing in infrastructure. In terms of use construction, the question from Olivia is what has Sentra Agraman learned for future greenfield bids from the I 66 and I 77. Well, many things that I already mentioned in other calls and in some minutes with you guys, but let me try and summarize. Those. One of the things is that the size of these projects calls for, greater weight of sales performance, if the risks, the project rather than being, too dependent on subcontractors, That's very important. And more detailed design earlier, that also helps to narrow the time span between, winning the bid and getting a final process. I think this is, this is a key component as well. And in general also taking into account some sort of factor of the business cycle evolution that can be specifically squeezing subcontractor or resources availability, okay, with all this in mind and with the engineering capabilities, we should be able to perform well. Of course, there's also in the combination, Sintra, construction, there's also items regarding the geotechnical risk delays and so on that are not in the hand of, of the contractor and the and the the concession operator to to sort out to, and avoid these risks somehow with the grantor. Okay. So, I think we have a good prospect of what is needed and I mean, we're looking for delivery of, more great assets in the infrastructure space. The third question from Olivia is what significant changes have you made to prevent future write downs at construction? For example, have you made changes to your risk systems? Are you confident this is the end of the guidance in construction? What portion of projects in your order book have you reviewed? Okay. I'll start the well, the first part I already addressed much of the trouble comes from the initial stages, the bidding, and secondly, design design design speed of authorizations and, and also on resources. So I think that from a risk, space, point of view to print future items. I think that's the main item. So it's covered in the first answer I provided. In terms of price of the order book review, we, keep reviewing all the more on an annual basis and for any results in particular year end and this 1st 6 months, we have controlled, reviews of estimates coming from the different from the different projects. Of course, this is very long, and you have always to monitor. There could be someone for senior events and so on, but It has been reviewed. As I said, we are not planning for our recovery of results on second part of the year, even though there could be some opportunities. And, we, think that we are covering the the space, of course, controls are always key and we should be doing more and more on a continuous basis. Then in terms of operating cash flow, that is the last question from Olivia, is, a negative €409,000,000 versus, operating cash flow, I mean, versus minus 69 in 2018. Do you still expect a cash outflow from construction of, 300,000,000 is the guidance ambitious given the ongoing, problems at construction? Well, in, construction the 2nd part of the year, we should have inflows from new projects that should be getting the closing and the advanced payments. Do you have the seasonal push that you have at the end of the year, in particular in Poland, you also have that in Spain and in general, in more countries. So, yes, you should you should have that. We have to, keep an eye on on on that. So, I won't be providing much of any specific guidance, but the ballpark number could be around the one that we, that we provided. As I said, there's positives and also potential risks, but the number I want to leave you with is the same that we mentioned. That's it from Olivia, and we should I don't know, we are not getting any more written ones. Of course, you can keep sending them. If you prefer inviting, we open the floor for the operator to give the Our first question today comes from Alodi Wall of JP Morgan. Can I start with Heathrow and the fact that the Brexit contingency has been reduced? I was wondering if that would have an impact on the dividend that we should expect for the year from it all. That's my first question. 2nd question would be on the news that we've seen from the CNMC in Spain. Which has opened an investigation into 13 tour roads, for potential practices that may have a restricted competition. I was wondering could comment on that news. And my third question would be on construction. I'm sorry to ask. I know you've talked about that. A bit, but can you clarify the guidance that you are giving for EBITDA for H2? And lastly, sorry if I missed that, but do you have an update on the 407 stake sale process? Thank you. Hi, Melody. Thanks for the questions. Okay, it's 4 of them. Let me go through, them. The first one is the Heathrow, dividend will Heathrow in their the interim report, they, reiterated the guidance. They commented on 400,000,000 pounds full dividend for the whole in year. As I mentioned before, the Brexit companies has been reduced because airlines are more ready to fly. So the impact on passengers should be less than initially expected. And, yeah, it should be smoother. Let's see how it goes. And at the end of the year, Heathrow will comment on the, on the dividend. One of the things that, also could be helping, as I said, is de levering from, inflation that comes with this kind of, Brexit uncertainty and the pound devaluation. So, no, we don't see risk of dividend payment. We see more opportunity, but as I said, it's something that will be exposed by Heathrow at the end of the year. Then you mentioned on, the initial investigations of the Competition Commission regarding growth maintenance. Well, this is a wide sector, investigation. All the companies are there pretty much for that, I mean, the main ones that have been in the last 15 years and also the ministry of public works. So it's initial stages. We don't have any comment to make. It's the whole sector. Regarding the construction guidance, we said that we have recorded a loss in this first half. And this same number is our best estimate for the full year. So, even though the support to this for improvement, There's also some risks we prefer to look at the number, in that regard. So around this the number we have published in the 1st half is like if the 2nd half was zero result, okay? And then do you ask about the 407 stake process. Yes, I covered that in the call. Well, we are waiting for the review from the judge and see how they found about this, this process we don't have an idea of timing. I'm I'm sorry. We don't have visibility on on that. And, we'll update in the moment we we get the information, obviously. So I think I cover your questions. Let me know if I miss something. Okay. Operator, probably before taking the next question, we have another one in writing. Coming from Marsh And Boital from Bank of America Merrill Lynch. And these are the questions. Do you have plans to still publish your internal valuation of the toll roads portfolio with detailed projections for the main asset Is the publication on hold until there is clarity on the 407 ETR potential stake increase? Well, we are discussing internally. We haven't taken a final decision yet. Of course, And this is, an information that is sensitive, even for other bills that we could be, publishing. So we are discussing the release of this of this information is something that we should provide clarity to the market after December, yes, and probably after the potential stake increase in the 407. And the second question, as for margin is, as construction continues to be somewhat challenging for another quarter, would you consider perhaps exiting some countries, regions or segments to reduce the size of the construction business in order to reduce the risk profile of the company. If we could consider this, yes, we could consider this The focus is clear where it is and where we have to, to deliver, but we don't have any specific comment on that, but yes, we could consider that. And I think this is all these are all the questions from March. So we open the floor again for the phone queues. Thank you. Our next question comes from Philippe Pali calling from Catcher Bank BPI. Felipe, your line is open. Hello, everyone. I'm sorry. I have three questions if I may. The first one is regarding construction. And if you can quantify the additional accounting impacts on our negative adjustments, that you mentioned, where book is doing second quarter. And, and, also, clarification, if I understood correctly, you expect a 0 a week about construction activity in second half. Is that right? 2nd question at working capital and now close to CHF 600,000,000 reported consumption during the first half. What is your expectations for full year? In other words, if we can assume that all this consumption will be recovering in second half or not, And last question, at services, if it's true that you capitalize on intercompany loans, close to $300,000,000 at this unit, as was mentioned, recently by the local press and when it was completed, because looking at net cash of service unit, it decreased in Q2 and compared with Q1. And also an additional one, from $55,000,000 net cash position at services, what is the amount related with Amy? Felipe, the sound was very poor. I got the first one Probably, I mean, if you could send an email to, to the email address that would be great and we could make sure that it gets answered with precision. I mean, you were asking about the detailed on the, the results on construction the second quarter. I won't be specific about the name of the projects, but I would mention some stuff in here. Right? So, we are talking about works in, the Portugal, for instance, that are, we are incurring €10,000,000 additional costs. And yes, we expect to be asking for compensation on those. We have recorded the cost not the benefit. Also, we have some works in, in Australia, I will mention the specific project where we are doing works at ordered by the client, but not signed off. This is something that we should recover with final certification. As I said, something like 6 and 6,000,000. Then we have, other 2 where we are taking 14,000,004,001,000,000 provisions And here also, we are seeing that, we have some extra cost incurred that we should be compensated for, but it's something that, these claims have to be validated, signed off by the client, right? So this is the bulk of the things that were recorded here. And also, as I said, we haven't charged to the, to the projects, some overheads and that this could change a long time with new projects. And this is around 5,000,000, that is additional cost. So this this is the bulk the bulk of the result in construction for this quarter. Okay. So, regarding the rest of the year. As I mentioned, we expect the 2nd part to be providing 0 EBIT, the second half of the year, right? So that means But as I said, this is an an estimate, and therefore, the result for the full year should coincide with the with the first half. Okay. I'm not more specific. I would ask you, Felipe, if you could write them down because the sound was really pull and I didn't get anything as well. Sorry. I I got just, a question on the services cash evolution. It makes no sense to discuss this cash evolution, that cash evolution will have to be discussed or adjusted in our formula. It depends with the buyer of or buyers of the of the asset. Right? So I wouldn't get into that detail at the at this point in time. So, please, if you could send that over if that's okay with you, Felipe? Okay. Well, thanks, Felipe. We're just waiting. If you have further clarifications, we can take them on the on the email. Okay. So I wouldn't be moving to another a bunch of questions we received from Stephanie Das from Royal Bank of Canada. Well, the update on the phone 72 stake, I already mentioned the phone ETR, dividend growth rate deceleration from double digit to 7% in the 3rd quarter. But, I mean, you mentioned because of traffic is low then, what are your mid, long term, even growth expectations, please? Well, in the end, you see that a dividend follows the operational performance traffic is improving, but I wouldn't take that as the final guidance for the for the dividend because it's also true that it's in a very solid financial position. So, there should be discussion among, shareholders to see what is the final dividend because there's room from a financial point of view. And as I said, also, traffic is improving in July. Okay. So, I think that the dividend path, we are very comfortable with the numbers provided in our models in the past. And we, I mean, we remain really comfortable on that path going forward. Then the last question from Stephanie, is, an update on the Heathrow, on Heathrow regulation. Well, in this, 2nd part of the year after the summer, we have also comments from the CAA on how they view returns also comments on the different initiatives or the look at commercials, agreements that they encourage. They should be commenting on the economic framework for expansion, you know, that this interim period is already taken care of with a commercial agreement with airlines. So up to 2021, But this second part of the year, Drew, later would be providing more views on, on returns and other aspects. And regarding business plan that is also key, we will be looking at Heathrow, probably providing at the end of the DRAM initial business plan. That in 2020 in the first half should become more, kind of final. Okay. So there's a moving, moving pieces. And, of course, this is such an important project for the, for the country, a old privately finance. That, I guess you will have to find a balance between, finance and affordability, and we think it it it will be this truck. I mean, bear in mind that we are discussing 2, 3, 4, 5 pounds per ticket compared to other charges that are way different. Okay. So as I said, more comments from the regulator will come in the 2nd part of the year. I think that's taking care of all the Stephanie's question. And now the we have another round of questions from Alexa's bill from PAXis Partners. So the first one is now cash outflow working capital is negative 1,000,000. Can we expect you to recover to at least minus 300 this time? Well, the minus 300 that is mentioned, we don't get into that specific details. We usually comment on different items that could move the needle. And then construction could be closing projects where we have do close. Clearly, also, well, if you're thinking to account the numbers from, service is that is the numbers that I mentioned in the slides, there's always working capital recovery from, collections from clients that 35 milestones and pay at the end of the year. So, yeah, there should be improvements I will mention any specific number. And, no, I will mention for the fiscal year 'nineteen, I would focus again on the potential for better news from dividends, from infrastructure. The next question from Alexis is which business is consuming cash? Well by now, construction is consuming cash. And there's working capital consumption in services also with the payment of the Drillingham contract. Services shouldn't recover the normal status of of cash generation and construction, basically is, it's consuming cash, as we mentioned, from the provisions we took in the first quarter. And, it's not expected to improve but not to be positive in terms of cash generation. Then the second question from Alexis is how much provisions do you have accumulated to date that will result in cash outflow in the future. And here, the main one that, I mentioned is the one from the first quarter, the 345, that, as I mentioned, in the rundown of the slides, already $56,000,000 have gone out in the first half. Okay. So we have less than 300 on that specific provision, that is a cash provision. Regarding the costs incurred this quarter, all of them are cuts in card. So it would be an opportunity for cash rather than inflow rather than for netflow. If we get certifications signed enough or compensation. Okay. Then we have the 3rd question from Alexis is the Forex cash impact is minus 66. It says what currency is this? Well, probably we are talking about different different levels, okay, and one of, of them is, the hedges we have on the net investment are rolled forward. So that means that all the the hedges we have in in Canadian dollar or US dollar for our net equity position that is fairly small. And we are net very, very long discolences. I roll over and every time there's a rollover, there's a cash, the outflow here. Right? So we shouldn't expect that something like this, coming forward. And now we should be materializing hedges we have in the in the pound investment. Okay? Then the question number 4 is your dividend from Heathrow, hedge and for how long yes, we have a good amount of hedges in pounds in total we have something like 500,000,005,001,000,000 pounds. It's a big sure. I just visited a little bit because it's a mixture of direct FX forwards and options on that, but the rough number is, is £500,000,000. Okay. So, it should be okay. We expect a lot of gamma in that currency, if I may. I think I covered all Alexis's bill from praxis Partners questions. We have a, okay, yes, now we have Felipe Martins from Casa Bank. That is has sent his questions in writing. Okay. So Felipe, The first one I already answered, I repeated for the public. Can you quantify the additional accounting impacts, negative adjustments that you mentioned were booked during the second quarter, okay, this I covered. Then, you have the second question from Felipe's after the €600,000,000 report consumption and working capital during the first half, what is your expectation for full year? Well, I already covered that on another question, we don't provide detail, both construction and services should improve. And then the main focus is the cash coming in from dividends and from divestments in the infrastructure. The third question from Felipe says this, if it's true, that Ferbio capitalized intercompany loan of 1,000,000 at services division, as mentioned by the press and when it was completed. Well, yes, this is, part of the close of the, 1st 6 months. So it was completed at the end of, of June. And in the end, between intercompany and equity, any amount we could receive would be coming from the divestment of of Amy. Right? So, it it could be neutral between, loan and inequity somehow. Right? So, it just it was done at the end just to keep the network level of Amy in, for, operational purposes in good shape. The first question from Filipe from CaixaBank is from the total €55,000,000 net cash position of services division, what is the amount related with, with Amy? Well, I don't have that detail with me here, but, Amy should be in a net debt position at this point in time, not net cash. And, okay, as I said, we are not providing specific details. This is part of the moving parts in the sale of services. Okay. So I covered all Felipe's question in writing. I have more coming. And this one comes from Charles May Nadir from Kempen. Two questions. The first one is regarding the 407utar stake, you walk us through the process timeline after the outcome? Well, it would be very quick. I have, a documented here from Centra Hill, but I think it's a matter of days when the process is out. When you have to secure the sale? Yes, so that's true. It's only 10 days, 10 working days that we have to complete the transaction. Okay. And then, this is a follow-up question from Charles on this topic. That says, is it correct that the cash out and the stake transfer will take place directly, but could be reversed in case of appeal from the losing party. And the question, the answer is just I mean, if there's an appeal, then, you have to basically, sell that back. Will you appeal if you lose likely, we'll, we'll see. In the, in case the process could drag on 4 months, well, no, as I said, the process won't drag 4 months after the outcome of the current trial. Then the last question from Charles is in terms of line of Infrastus, could you give us an update where do you see opportunities? Okay. So here, I would, pass on first to Pacoclemente, see if all of, Cintra and and then some, comments on, on, airports, even though on airports, the main item is always in law Thank you, Francois. Well, in terms of the pipeline in the for the timeline of, 24 months. We are we have a screen between 25 and 28 projects. Amounting of, 50,000,000,000 of euros in investment. 25% of that, could be potentially managed lanes. We believe that we will be either bidding or completing the request for qualification process, roughly in 5 projects during 2019, and the rest will be in 2020 2021. Geographically speaking 50% of the project will be in the US, and 20 in Europe and the rest in the rest of the world. Most more precisely in terms of which will be the the coming, the coming project in the next, in the very next future, we will have the first one will be the item in Alabama in which we will be hopefully presenting our submission at the year end, this year end. After that, we will Hopefully, we'll be in the RSQ of, of the projects in Maryland. And some of the projects in Georgia, all in the U. S, in the U. S. There are some other projects expecting in Chile and in Poland, but it's, all of them are in a less mature stage. Thank you. Thank you, Ernesto. This is Inaki Garcia, CFO of Faroea Airport well, I I cannot give you, very much details and process that that that are not, whether it's not a formal process. But as you know, I mean, we are now focusing on the US market, and we are in conversations with our power administrations due to the growing interest in P3 projects, also with airlines and private investors since we opened the office, commercial office in Austin in 2018, probably the only process that that that you have heard about is is that that we are looking carefully, but but there are many others that that we cannot disclose more details. No? On, on, on, on, we are following, ADP. As you know, the process is on standby, waiting for the results of the consolidation for a referendum of privatization. This process won't finish before March 2020, but, we are working on that and building the consortium, and of course, I mean, the quality of the assets is something that we could be interested in. And and finally, I mean, we have opened a commercial office for the asset market. We are going to have a look at what happening in in Asia, particularly in India, Indonesia, but I cannot I cannot give you more color on specific countries and assets. Okay. Thank you. Inaki, now we have also written questions coming from Anabel Ahmed from Barclays. The first one is didn't tend to publish a business plan for NT35 West. If not, could you provide a guidance for fiscal year 2019 for the main financial metrics? Well, what we initially do is wait for some years of operation until we publish a business plan. Okay. Here is the same thing. It's, well above our expectations also, and it in spite of the overall discussion that we were mentioning before regarding commercial reasons. Okay. So we have to come to final conclusion internally. Question number 2 is, a clarification question on construction. They were talking about $5,000,000 incremental cost taken in Q2, but that's the actual EBITDA loss in Q2 versus a normal positive EBITDA, which which could have been in the euro 35 to 40,000,000 range. So shall we understand the incremental total cost was 044 $5,000,000 in the quarter. Well, that's right. I already provided that answer in more detail in a previous question. The third question is, could you please re explain why these costs could not be booked alongside the provision in Q1? Can you be confident in how such events will occur in the remainder of the year? Well, the, as I mentioned during the presentation, there was a consultation to Ephric, the interpretation committee of the ISB, regarding losses for future losses for contracts. And the answer to that consultation was that you should take costs specifically related to the project, not other like central overheads, right? So the central overheads in the construction division are charged to the different, projects, right? When you get more projects on board, you can charge more of that fee, or you can take some efficiency initiatives. Right? So the growth in profitable contracts that some of them will be coming and we will be updating in the 2nd part of the year. Should be taken part of this effect. Question number 4, in services regarding the premium contract, will the future settlement payment be executed by Focal or by the future acquirer of enemy? In other words, will this liability reduce the disposal price of any or stay with the Ferbio group? Now there's no guarantee from frugal whatsoever in this settlement. So is AIM's liability, of course AIM's liability is something that the acquirer has to has to handle, right, and taking into consideration. As I mentioned in different moments of the presentation, this settlement has had no impact in our accounts because we took a very similar number in our fair value assessment. So that settlement is already part of the fair value assessment we took, in the, year end of 2018 accounts. Okay. So that takes care of Nabil Ahmed, reading questions. I don't have any more breathing questions, so I open the floor back to the operator. Thank you. We now have a question from Jenny Ping of Citigroup. Your line is open. Hi, good evening. Just one question from me, please. I just wondered whether you can talk a bit more about, your definition of structure assets, which you're looking at to invest in. Because based on my understanding, you recently bid for some power transmission assets in Chile, And, obviously, there has been press, talks about, some French and Spanish hydro assets. I just wondered whether you can go into that in a bit of more details in terms of the scope and the size of, investments outside the traditional tow road infrastructure assets? Thank you. Well, thanks very good question. Actually, our focus is on transport infrastructure where we could have a differential capabilities and therefore, earn extra return. You know that the market is flooded with funds dedicated to infrastructure investment So we need to focus in our differential capabilities. We have, differential capabilities in terms of pricing in dynamic tolling in congested areas in the U. S. That's our main focus. When we have the greenfield space, we can combine with the construction and there's less competition in these projects. So that's a key part in our strategy. Also in, in airports, we can derive from the, the know how, also in, in Heathrow and in our division to look for projects where we could have a value added And the summary is that we are looking for transport infrastructure as the main priority. And that's what it should be. If other projects come that we think makes sense, we could look at them, but really, really, the focus on the market should bear that in mind is, as I said, transport infrastructure, unique assets where we could have our capabilities put into play. Thank you. Thank you. I have another reading question. Thanks for that guys, it's easier that when the line is breaking down. So the we have a follow-up question from Stephanie Death. From Royal Bank of Canada. It says, could you please update us on timing of any disposal? Have you done much progress and could we expect the sale by year end too. Well, here, the, for obvious reasons, there was, all this negotiation with the Birmingham City Council, there was only some preliminary work. So the work is at full speed now. And I'm not committing on on timing because it's, it's it's it's complex. We have to put on a lot of information And then it should be spilling into 2020 probably, but let's not speak to that specific date. We're working to do it as fast and efficiently as possible. Okay. So, I don't have any more weekly questions. So I open the floor again for the telephone questions. Our next question comes from Nicholas Maurer of Morgan Stanley. Nicholas, your line is open. Yes. Hi, Nestor. So 2 for me. And actually just regarding on Nabil's question on construction margin, If you expect the EBIT to be flat into the second half, obviously, it implies that since you're profitable in Spain, you're profitable in Poland, are you profitable at Weber? You got still some pretty heavy loss making contracts. And again, I struggle a little bit to understand why you're not provisioning all this exome things that are waiting for the second half to recode these losses. And then the second point is you are teasing us on the dividends from the infra assets. So when we look at your starting points at full year 2018, where you received I think $623,000,000. Should we be expecting something more generous in terms of dividends from infra assets to be to be paid to the infra holdco. Are you a bit of an effort from 4.70TR from NTE and maybe at the end of the year from Heathrow? Okay. Thanks, Nicola. Okay. Let me take this, these questions. Regarding the products I was mentioning, as I told you, the concepts, where we are taking the cost and the revenue and these projects where we have been asked or to do things but you cannot recognize in the accounting until you have a final sign up for certification, right? Micky Bens, that we think are subject of compensation, but we are not taking the claim as, let's say, work in progress as many other construction companies do, right? So, our work in progress is is very low in construction. So we don't expect the contracts not to be profitable. We expect them to be profitable But, the timing of cost and revenue recognition are not at the same time. Okay? The reason I'm saying and neutral is just to take a prudent approach just in case signing off or claims don't come at the end of the year. Okay. But as I said, our expectation is that these contracts make a profit. Otherwise, you are right. We should be taking the hit already. Then, the regarding the dividends, as you say, we were teasing, well, the main, the concept in the last year that made a last year dividend higher in the first half was also one extraordinary dividend from the services concession on maintenance of a highway called a 2 in, in Spain. What we have in the 2nd part of the year, this year is the NT of Kate, that we expect an improvement on the number that has been around, that is $125,000,000 our share. Then we have in Heathrow, the Heathrow has guided for, 400,000,000, but, depending on the black inflation and so on. Maybe there could be a margin. That's something we have to to wait here to, to see. And then the 407, as I said, is quite deliberate, has solid balance sheet. So it's a matter of discussing with shareholders. So all these things could bring improvements to the main numbers that the people are, the different analysts are discussing. So I won't get into any specific number because they are subject of discussion among different, shareholders. And many of them, right? So, we will have to walk the path. Thank you, Nicolas. Next question, please. Our next question comes from Robert Crimes of Insight. Robert, your line is open. Thanks. Yeah. And Esther, just wondering, bit of a positive surprise on the I-seventy seven, million of EBITDA. I thought it was just open for, for June in the first half. Can you make some comments on the performance of that asset and how we should think about it for the full year? Well, I will pass that on to to packages. It's right. We have something like half of the whole lens open. And construction was delayed a a a little bit for the opening of the of the remainder. So, let me pass it on to Paco for the update on that. Thank you, Ernesto. Well, it's, As Ernesto has mentioned, it's only, 1 month of operation. It's still very, very early. But I think that so far, the the traffic has grown, quickly, we have recovered, we have to cover the pre construction level of traffics the average speed has increased 18% and on the morning and in the afternoon, 47 we are right now for the 1st 6 months in a scheduled model mode. Which means that dynamic mode is still pending to be implemented. It will be, it will be done, hopefully on on November. But so far, the 4 weeks that we saw so far is, a few, 20% each of the 1st week on operation and the July traffic is in the same pace. So, we are expecting to, to open the remaining tranche of the of the infrastructure at the at the year end, and it will be, something that will, improve our our traffic. And, well, we believe that this, roughly or summarizing, we are is it still very early, but it seems that it's, according to our expectation. But frankly, just with that 1 month, you've managed to do, $9,000,000 of EBITDA. So would it be reasonable to kind of assume at least for the rest of the year? Well, we we are getting paid partially from, liquidity damage from the, from the contractor. So it's still very, very early to, to come up with a with, which will be the the revenues that we are expecting for the rest of the year. So, we need more time to see how the, the infrastructure is behaving. There is still a lot of work underway. This, we believe that it is scourage the user. They are preventing them to get used on their facilities. So it's still very, very early. So So it's all we can say in that regards, rather. Okay. But it's a clean, it's a clean, a bit number. There's nothing funny in that. Well, it's clean, Robert, but as you said, they are receiving damages from the construction JV, right? So that is not, let's say, traffic related profit. Is penalties on the construction delay that they are cashing in. And can you say how much they were of the of the 9,000,000? Yeah. We we'll update you on that. I don't have the exact number now. We we'll update you. Thank you. Thanks. Okay. So next question please. Our next question is from Guillermo Fernandez of Kepler. Guillermo, your line is open. Hello, everyone. And thanks for taking my question because now I think you have answered more than 30 if I'm wrong. Mine would be on the alternative uses for the cash in case you are not allowed to get the over 5% stake in DataF 407. Would you consider increasing your stake in any of the assets you're control, I'm thinking about mainly about the minus names. The second one would be, you comment, and you have a close but it would be in our soul, and you come into your presentation, then the appetite for this kind of facets. Is there any other one in your portfolio that you may consider rotating the timing, I don't know, 4 months, and that will be all because the rest of us already been answered. Thank you, Guillermo. The line was breaking down a little bit, but I think I got them. The first question was that if we don't are not successful in buying this, taking the 407 that we're pursuing, if we could use the money increase our participation in some of the managed lanes, or other of our good infrastructure assets. Well, I don't know if we have the opportunity available. That would be great if we could, because the dynamics are really positive. But I don't think that we have the opportunity, to be honest. And then the other question is if we have other, participations or assets like household that could be subject of sale or reverse inquiries. First one, we're not entertaining anything like that at the moment. Okay. So, no, I mean, I was always here and looking to redeploy the proceeds when we get them to I don't know if I missed anything, Guillermo? No, that was all. Thank you. Okay. Thanks Hello, Guillermo. So I don't know if we have any more calls. Definitely not in the higher inbox, and I don't know if operator we have Any other questions, then we would be closing the call. Is there any other questions? We have no further questions. I'll hand back to you. Okay. Thanks a lot. Thanks for attending the call and looking forward to meeting you in the near future. Thanks. Bye. Ladies and gentlemen that does conclude today's call. Thank you for joining. You may now disconnect your lines.