Earnings Call: Q4 2015

Feb 25, 2016

Good afternoon, everybody, and welcome to Ferrovial's conference call to discuss the 2015 financial year results. Just as a reminder, the results report and presentation are available to you on our website. If you have any questions, you may send them either to an email to ir@ferrovial.es or ask in the Q&A session at the end of this call. With this, I will hand over to Mr. Rafael del Pino, Chairman of Ferrovial, who will be leading this conference call. Thank you, Ricardo. Good afternoon, and thank you for attending the 2015 full year results presentation. I am joined here today by Íñigo Meirás, our CEO, Ernesto López Mozo, CFO, and the CEOs of each of our business divisions. In a year marked by macroeconomic concerns, we have achieved growth in financial results and in the main operational KPIs. Cash flow generation has also been strong, supporting a solid remuneration to shareholders. We have seen good traffic growth in our main infrastructure assets, both in toll roads and airports. We highlight the performance of both 407 ETR in Toronto and NTE Managed Lanes in Dallas-Fort Worth that are above our expectations. Our portfolio in operation continues to grow. Last September, we opened the whole of the LBJ Expressway Managed Lanes project in Dallas, and the toll road is already showing encouraging traffic and revenue figures. In airports, Heathrow reached again a new record in passenger numbers at 75 million, a 2.2% year-on-year growth, and Glasgow also had its highest-ever growth last year at 13%. We continued to grow our presence in our core markets with the award of several construction projects in the U.S., Canada, and Australia. In Poland, Budimex reported double-digit growth both in order book and EBITDA. As for our order book, we reached a new record high. Adding construction and services, the year-end figure stands at over EUR 31.5 billion. Last year, we generated operating cash flow of EUR 889 million, excluding infra projects, with a balanced contribution from dividends received from our infrastructure assets and cash flow generated by our services and construction divisions. 74% of our operating cash flow comes from international operations. After investments, our activity cash flow reached EUR 560 million compared to EUR 514 million in 2014. The net cash position, excluding debt from infrastructure projects, reached EUR 1.5 billion. Our corporate debt has no meaningful maturities until 2018, when our first corporate bond matures, which is EUR 500 million. As for our consolidated group net debt, it came down to EUR 4.5 billion after several asset sales and the deconsolidation of both radial highways in Spain. Shareholder remuneration remains a key pillar of our strategy. Dividends grew last year by 4.4%, with EUR 532 million invested in both a scrip dividend and a share buyback of 11.7 million shares, which have already been amortized. In addition, the final months of 2015, we acquired an additional 760,000 shares, which are to be amortized during 2016. Total shareholder return in 2015 reached 31% on the back of a strong infrastructure performance and low interest rate environment. We keep on rotating our portfolio to crystallize value after risks such as construction and ramp-up are over. Last year, we agreed the sale of a stake in our Irish toll roads, the sale of the Chicago Skyway, and the sale of the Indiana Toll Road, which implied net proceeds of around 350 million. Please bear in mind that only ITR was cash-streamed last year. At the same time, we continue our growth strategy, bidding for projects and corporate transactions. At the end of 2015, we launched an offer for Broadspectrum, previously called Transfield Services, in Australia. This is still an ongoing process, and the offer stands until March 21st. In the next slide, you see the main figures of our results. Revenues were up around 10%, reaching EUR 9.7 billion, driven by double-digit growth at services and in infra. EBITDA grew by 4.5% to EUR 1.03 billion, and net income stood at EUR 720 million, increased by 79% as compared to 2014. This growth was helped by EUR 373 million of non-recurring items related mostly to Heathrow, the deconsolidation of the Radial 4 and AP-36 toll roads in Spain, and the sale of the Indiana Toll Road. We will look at these impacts in further detail later on today. Let me hand over the call now to our CEO, Íñigo Meirás, who will discuss the operating performance of our business units. Íñigo? Thank you, Rafael. I will now run you through the divisional operating performance for 2015. Let us start off with toll roads. In toll roads, posted strong organic growth and was highly successful in bidding for new concessions, achieving relevant awards throughout the year. Dividends from our project outreach investments. We received some EUR 267 million as dividends from our main toll roads assets, EUR 242 million from 407, and EUR 24 million from toll roads in Portugal and Ireland. We invested EUR 120 million in the equity of new projects, EUR 88 million in the U.S. Managed Lanes and EUR 25 million in projects in Colombia and Australia. The division keeps looking actively for attractive opportunities to deploy capital with a high degree of bidding activity. As for the operations, we saw significant and steady traffic growth during the year in all the geographies where Ferrovial is present. The economic performance in the regions where we operate, lower oil prices, and better weather conditions are behind this strong performance. Growth has continued through to January 2016. In September 2015, LBJ Managed Lanes opened in its full length, three months ahead of schedule and showing encouraging signs by the day. The 407 extension phase one is expected to open in the next three to five months, enlarging the catchment area of the 407. As Rafael mentioned before, during the past year, we saw several new contracts awards. In Australia, we were awarded the Toowoomba Second Range Crossing for a total investment of 1.1 billion Australian dollars. It is a 25-year concession in which Cintra holds a 40% stake with an equity investment of some EUR 11 million. In Colombia, we awarded the Ruta del Cacao toll road with a total investment of EUR 818 million. A 25-year concession in which we hold a 40% stake and with an equity investment of EUR 14 million. In Slovakia, we were named the preferred bidder in January 2016 for the Bratislava Beltway with an investment of EUR 1 billion, availability concession with an equity of EUR 50 million. Three projects achieved financial closing during 2015. The 407 extension phase 2 in Canada reached its financial close in the first quarter of 2015, with its first section expected to open to traffic by the end of 2017. The I-77 in North Carolina reached financial close in May 2015. Construction work in this project has already started. The financial close of Toowoomba toll road in Australia was reached in August 2015. Finally, the Benavente-Zamora toll road in Spain was refinancing in May of last year. As the Chairman mentioned before, crystallizing value in our portfolio through rotation of mature assets after reducing risks is a key part of our strategy. As such, we agreed to sale of several of our assets last year. The Indiana Toll Road sale was completed in May. For this sale, Ferrovial received EUR 46 million, leading to EUR 30 million in net capital gains. The Chicago Skyway sale was agreed in November for a total consideration of $2.8 billion and net proceeds of $269 million for Ferrovial. The sale should close any moment now. In the same way, the sale of an important part of M4 and M3 toll roads in Ireland is about to materialize. These sales will bring proceeds for Ferrovial of EUR 61 million. Both Chicago Skyway and M4, M3 being reclassified as asset held for sale. As for the financial results of the toll roads divisions, which has the fastest growing division in 2015, revenues grew by almost 19% to EUR 513 million, driven by the full year consolidation of NTE and the full opening of LBJ, as well as the strong traffic performance in the year. EBITDA was up by 29.6%, also fueled by lower bidding costs and successes received. In the next slide, the 407 ETR has again beaten our internal expectation last year with traffic up by 3.3%, despite tariffs growing by some 9.5%. Helped by the economic growth both in the region, lower oil prices, and congestions from road works in the alternative roads, mainly in the 401. We expect construction works in the alternatives to be completed during 2016. 2016 tariffs has already been announced with an increase of close to 10% on average from the 1st of February. We expect the price increase to have a neutral impact on traffic. As for the financial position of the 407, net debt EBITDA fell to 7.5x multiple from 8.1x in 2014. The rating agencies reaffirmed their views on the toll road. Dividends continue to increase. 407 paid CAD 750 million to its shareholders, 3% above the CAD 730 million in 2014. The first dividend for 2016 has been paid this month and was flat versus last year. The NTE and its lanes have now been in operation for three quarters since it opened in October 2014. Its financial performance has been extremely promising during the first year. Revenue increased each quarter from $6.4 million in fourth quarter 2014 to $15.2 million in fourth quarter 2015. EBITDA has increased from $2.2 million to $10.9 million in the same time frame. As for the traffic, the asset is still in ramp up, and continue to be for the near future. Traffic has increased by 55% in ADT, average daily traffic, from October 2014 to October 2015, as we continue to see a recovery in the highway corridor, which is up by 22% in the past year. Finally, looking at tariffs, the NTE started off with promotional ones in 2014 and started dynamic tolling in April of last year. Prices have increased four times until the end of 2015, going from initial $0.22 to the current $0.42 per mile. Looking now at services division, revenues were up by 11.3%, driven by the growth in Spain and the positive FX in the U.K. In comparable terms, revenues increased by 42%, which we believe to be a remarkable growth in a non-inflation scenario. EBITDA decreased by 26% in comparable terms, and it was impacted by the EUR 110 million adjustment at Amey related to the Birmingham contract, which included EUR 34 million from losses incurred during last year and EUR 76 million that cover potential unfavorable outcome from litigation and a review of the expected margins from the duration of the contract. The main highlight is probably the EUR 289 million operating cash flow, which was generated despite Birmingham and is in line with last year, with 2014. Looking at the geographies where our services division is present, the performance has been rather different in each. In Spain, organic growth reached almost 5% in revenues with a stable profitability. EBITDA margin remains at 10.7%, in line with the margin achieved in the first nine months of the year. The order book fell by 8.8%, which is a direct reflection of a lower tendering activity in Spain, affected by the several election processes in the country. Finally, in terms of cash flow, there were meaningful financial improvements through the year, as collection dates fell from 110 days in 2014 to 105 days in 2015. An important improvement versus the 146 days, which we had back in 2012. In the U.K., 2015 performance was influenced by the budget constraint in public clients and exceptional items. Revenues were up by 14%, although much of this growth was supported by the strong sterling pound. In comparable terms, revenues grew by 3%. EBITDA was affected by the adjustment in the Birmingham contract. As I said before, it is EUR 110 million, and pressure in volumes from local government. We expect the latter to continue during this year. The order book in the U.K. remains reassuring with a 1.3% growth in local currency, which is no mean feat in the current environment. Finally, services remains an area for expansion at the right price and within our financial discipline. In this sense, we launched at the end of 2015 a bidding bid for Australian company, Broadspectrum. The offer period has recently been extended until March 21st. The construction division continued with its strong performance last year. Very solid operating cash flow generation reached EUR 272 million, compared to EUR 236 million in 2014, when it included EUR 49 million inflow from the suppliers payment plan, which has not taken place last year. Revenues grew by 9% with a strong performance of the international activity, up by almost 15%, with a strong growth at Budimex of 6% and the contribution of new projects in Chile and Australia. Our domestic revenues fell by 10%. There was a surge in profitability, with EBITDA margin at 9.2%, comparable to 8.9% in 2014, mainly in the back of Budimex, Webber, and the non-cash profits, which in 2015 reached EUR 110 million versus EUR 67 million of 2014, as several projects came to an end and construction risk was reduced. As for the construction order book, it grew by 8% through a combination of declines in Spain of 14% and expansion in our other main markets. Budimex, with an order book that grew by 38%, posted the highest ever annual awards last year at over EUR 1.7 billion, circa 70% of which is civil works. Our U.K. Airport showed a very positive performance in 2015. They generate operational cash flow of EUR 132 million through the dividends they paid to Ferrovial. Heathrow, with an 11% increase in ordinary dividend payout, paid Ferrovial EUR 95 million. The non-regulated airports, AGS, paid EUR 38 million in dividends, which has taken place in the first year after the acquisition. 2015 was a record year in terms of passenger traffic, 75 million passengers traveled through Heathrow, 2.2% more than in 2014. The airport beat its historical records on more seats sold in larger aircraft and a stronger performance in European routes and long-distance flights. Demand from airlines to fly from Heathrow continues to outstrip the supply of slots. Last year, Indonesian Garuda moved its London operations to Heathrow from Gatwick, following on the steps of Vietnam Airlines and Air China. As for the non-regulated airports, traffic grew by 5.1%, especially in Glasgow, which at 13% was the highest growth we have seen in history. For 2016, traffic indications remain positive with Heathrow passengers up by 1% and AGS by 2.5% in January. Heathrow has constantly improved services quality and user satisfaction throughout 2015, and this will continue to be a constant objective for the airport today and going forward. As a result, 81% of passengers surveyed rated their experience at the airport as excellent or very good, versus 78% in 2014. Heathrow's efforts in operation excellence has led to several recognitions in 2015. Heathrow has achieved the highest passenger service ever, making it Western Europe's best hub airport for the first time. It has also been named the best airport for shopping for the sixth consecutive year. T5 has been awarded the best airport terminal for the fourth consecutive year. As for the potential expansion of the airport, as we have mentioned in the past, Heathrow's Runway 3 was shortlisted and unanimously recommended by the Davies Commission in July last year. The government's final decision on the matter is still pending. In December 2015, the government agreed to the need for new runway capacity in Southeast of England, but is undertaking further analysis on environmental impacts, which should conclude by summer of this year. All our U.K. airports are integrated through equity consolidation. Their contribution reached EUR 199 million last year, EUR 186 million from Heathrow and EUR 14 million from AGS. The strong increase in the contribution from Heathrow, which more than doubled, was helped by non-cash and non-recurring impacts such as the negotiation of pension plan conditions, which had a EUR 67 million positive impact on Ferrovial's P&L, and the reduction in the corporate tax rate from the current 20% to 18%. With this, I will wrap up the division on operational figures and hand the call over to Ernesto, the CFO, who will run through our financial results. Thank you, Íñigo. Good afternoon and good morning. Let's start by looking at the operating cash flow generation. in 2015, our operations generated EUR 889 million before taxes. We reached this figure despite reducing factoring to zero from EUR 118 million we had in 2014. Also with no supplier payments planned. Remember that in 2014, we got EUR 75 million from this source. Working capital in construction and services contributed with net cash of EUR 113 million. There was a balanced contribution to operating cash flow generation across all our business lines. Construction contributed with 28% of total operating cash flow, reaching EUR 272 million, well above the EUR 236 million of 2014, also considering the fact that comparable sales grew by just 1.2%. Services generated 30% of total operating cash flow or EUR 299 million, which was just short of the EUR 302 million generated in 2014. Toll roads dividends received reached EUR 267 million, of which EUR 242 were from the 407 ETR and EUR 25 from the rest of the toll roads portfolio. Finally, airports dividends received reached EUR 132 million, of which, as Íñigo just mentioned, 95 came from Heathrow and 38 from the non-regulated airports. Dividends from airports and toll roads represent 42% of the total operating cash flow, and this year covered 75% of Ferrovial's remuneration to shareholders, scrip dividend, and share buybacks. In the EUR 17 million line, other, we include purchase of shares linked to management incentives, bidding costs by airports and toll roads, and other corporate activity. The main uses of the operating cash flow generated are shareholder remuneration, which reached EUR 532 million in 2015 to Ferrovial shareholders, in line with the group strategy. Also investments, which in gross terms reached EUR 374 million, and we had EUR 270 million from services and EUR 120 million from toll roads. Also, we had EUR 35 million of interest payments and 29 of cash tax payments. Let's move on to review the evolution of net debt. Net cash ex-infrastructure projects reached EUR 1,514 million at the end of 2015, without including the proceeds from the Chicago Skyway and Irish toll roads asset sales. This is roughly EUR 200 million. We'll see this in the accounts in 2016. They have been agreed, but not yet fully closed. As I just mentioned in the previous slide, construction and services showed good working capital performance. Bear in mind that as I mentioned before, the factoring has been reduced by EUR 118 million. Also we had some provision releases, EUR 111 million, that is a non-cash item, improving the EBITDA. Net debt at the infrastructure projects level reached EUR 6,057 million, coming down from the EUR 7.9 billion in December 2014. This is a EUR 1.8 billion reduction on the back of several impacts. The main ones are, well, increase in debt, we have interest and dividends of EUR 692 million. We have the FX impact increase in debt as well of EUR 498 million. This is due to the U.S. dollar debt in the United States infrastructure. Also we have additional investments of EUR 556 million. Then reducing debt, we have the deconsolidation of the Radial 4 and the AP-36, which is EUR 1.2 billion. Also, since we signed the agreement to sell Chicago and Irish toll roads, we have classified these assets as held for sale, and this reduces EUR 1.6 billion probably of debt. In the end, consolidated debt for the group stands at EUR 4.5 billion, compared with quite a higher number of EUR 6.2 billion in 2014. Íñigo has discussed, we will move to the next slide, has discussed in detail revenue and EBITDA evolution. I will touch now on the rest of the P&L. The first line would be disposals and impairments. We have a positive impact of EUR 131 million. This has been impacted by the capital gains from the sale of ITR, this roughly EUR 46 million. We have a positive effect also from the deconsolidation of the Radial 4 and the AP-36. This is EUR 114 million non-cash impact and comes from the reversal of accumulated losses in this consolidation of these toll roads. This is partially reduced by the write-down of goodwill for Autema toll road, EUR 55 million. In terms of financial expenses, they reach EUR 637 million. We could divide this into two lines. One is the financial expense, EUR 498 million from financing, reflecting this year the full consolidation of NTE and the full opening of LBJ. These add something like EUR 17 million in financial expenses to last year's figure. We have another concept, fair value adjustment. We have EUR 138.5 million loss, mainly from the SH130 from a derivative. This derivative is part of the non-recourse financing package of this toll road. Currently the lenders are negotiating with the sponsors and this legacy swap cannot be considered effective in the newer scenarios. We have the equity accounted results. They are more than double last year's, with EUR 312 million. On the back of Heathrow, with EUR 106 million contribution, reflecting some one-offs that Íñigo has discussed previously. Also we have the meaningful contribution of the 407 ETR with EUR 82 million. In the line of income tax, we have a positive EUR 54 million versus a pre-tax profit of EUR 577 million, and this is mainly explained by the recognition of tax losses carried forward in the U.S. The sale of Chicago Skyway implies that they should be used, these tax losses carried forward in 2016 instead of in the long term as previously. Also bear in mind that the equity accounted line is already net of taxes. Taking all this into account and timing differences between fiscal and accounting reporting, the recurrent tax rate approaches 30%, as shown in detail in the shareholders' report. Our net income in 2015 reached EUR 720 million, a 79% increase versus 2014. This is a very strong year from recurring operations, but also with very positive extraordinary impacts summarized in the slides we just covered. Well, thank you, and letting me hand the call back to Rafael del Pino. Okay. Thank you, Ernesto. Following the increase in 2015 of 4.4% between both the scrip dividend and the share buyback programs, the board will again propose to the AGM an increase in the remuneration to our shareholders in 2016. The proposal will maintain the same flexible dividend program which we introduced two years ago and will include on one side, two scrip dividends, and on the other, a share buyback program. The two scrip dividends, as a reference, could imply EUR 0.311 and EUR 0.408 per share for a total dividend of EUR 0.719 per share, which compares to EUR 0.702 we paid in 2015. That is an increase of slightly over 2%. The share buyback program will be of up to EUR 275 million or 19 million shares compared to EUR 265 million and 12.5 million shares bought in 2015. In summary, 2015 has been an excellent year in a challenging environment. As Ernesto mentioned, we will maintain the strong cash flow generation in 2016. We have had also a remarkable amount of new projects awarded in our core markets, which support the group's expansion. There is no doubt that we face challenges at our services division, particularly in the U.K., but we remain positive as we continue to pursue profitable growth. We continue to enjoy a net cash position of EUR 1.5 billion, ample liquidity available. Looking ahead, we will continue to push for operating excellence, good cash flow generation, and profitable investment and growth with financial discipline, while adequately remunerating our shareholders. Thank you very much for your time today. We now open the floor for questions that you may have. Good afternoon, ladies and gentlemen. The Q&A session starts now. If you wish to ask a question, please press 01 on your telephone keypad. Thank you for holding. We have no questions for the moment. Ladies and gentlemen, let me remind you that if you wish to ask a question, please press 01 on your telephone keypad. We have a question from Filipe Leite from BPI. Sir, please go ahead. I have three questions, if I may. The first one regarding 407 ETR that presented, as you mentioned, a slight evolution in first quarterly EPS. What is your expectation regarding dividends from this concession for 2016 and also for the upcoming years? If going forward, we should expect a DPS growth for ETR in line with operating results or should we use any other metric? The second question is regarding pipeline. If you can give us an update on what projects are you looking for and in what regions? The last one regarding M&A and if it is true that you are looking for other potential acquisitions in the Australian market apart of the already announced bid on Broadspectrum. Thank you. Okay. Regarding your question on ETR dividends, we do not provide guidance on future dividends. We can say that the fundamentals of the highway remain very strong, taking into account that the compounded annual growth in the last three years of EBITDA has been 12%. So far, we have not seen any signs of weakening in this trend. We strongly believe that operational performance is the best predictor of future dividends and value. Regarding your question, it is true that in 2015, the dividend growth was at a lower rate than EBITDA, but in previous years, dividend growth was much higher than EBITDA. EBITDA in the last five years, the compounded annual growth rate of EBITDA has been 10.6% and dividend growth has been 24.4%. The point is that the potential to pay dividends in any given year is not only determined by the EBITDA, but also by taxes, CapEx, and levels of some debt. As I said before, we do not provide projections on dividends nor in any of these variables. This is Jorge. Regarding your question on pipeline, in terms of airports, we are working on a number of opportunities right now in the U.S. We are working the Denver International Airport process. The bid is to be submitted in a couple of months' time. We are exploring the possibility of bidding for the new wave of airports to be privatized in Brazil, four of them for the time being. We are keeping an eye on a number of privatization processes in Europe. For example, in France, you have Nice and Lyon airports, but there are some other airports apparently being privatized this year in Central Europe, and we are monitoring as well those opportunities. I am Enrique Alfato. Regarding your question on the pipeline for 2016, we are working on five highway projects, Pūhoi in New Zealand, in which we are already pre-qualified and will be submitting an offer in the next weeks. The Bucaramanga-Pamplona project in Colombia, also in the next weeks. Then we have the I-66 in Virginia. It is a Managed Lane project, and we expect to submit an offer by August 2016. We also have in the U.S. two availability projects, the I-70 in Denver and the 427 in Canada. We are also working in a small project that we won some years ago in Spain, and it might come back. We are also working on two water projects, one in Peru and one in Chile. Okay. The last question was regarding M&A in Australia. We are not going to provide any comments on any M&A in general, and you will have to bear with us for that. Thank you. Okay, thank you. Next question, please. The next question is from Martino from Bank of America, Merrill Lynch. Sir, please go ahead. Yes. Good afternoon. It's Martino Wartell from Bank of America, Merrill Lynch. I just have one question. I'm just wondering if you could provide perhaps a bit more color on the U.K. services issue. Can you explain in a bit more detail what led you to take this write-down on the Birmingham contract? Could you perhaps give us some color on 2016 margins expectation? You're indicating that profitability in some contracts is weakening in the report, but could you perhaps quantify a little bit or perhaps give us some range? Thank you. Okay. This is Santiago Olivares speaking. First question related to Birmingham and a little bit more color on the adjustment. Basically, as you may know, Birmingham is a long-term PFI contract of 25 years, that has two phases. One is the CapEx phase that is 5 years, and it's finalizing now, and then there's a 20-year phase of maintenance, of OpEx. Right now, we are in dispute with the client, with the Birmingham City Council, due to some differences in the interpretation of the contract. That difference has to do mainly with the CapEx phase that is about to finish. It has to do with the scope. We have different interpretation of what is the scope of that CapEx investment. As Íñigo said, the total impact that we have registered in 2015 is EUR 110 million. This amount can be divided into two elements. The first, which is EUR 34 million, are the losses of the contract in the year. Basically, those losses are related to the additional investment to finish the CapEx phase and also the legal cost associated with the dispute. The second element to complete the EUR 110 million, which is 76, is a provision that includes a potential impact of a negative outcome in the dispute, in the litigation with the council, and also a review of the profitability of the contract throughout the life of the project. I think that gives you some idea of where we are. In terms of process and timing, we are now in the final phase of that litigation, and we expect an outcome in the next 2 or 3 months. Then regarding margins, clearly, we do not provide specific guidance on numbers, but I can give you some color on what is the reality in the market. Clearly, the reality is that the market is becoming more difficult, mainly due to the strong cuts in budgets in our public sector clients, specifically the local governments. Local governments are suffering cuts, and that is reflected in less volume through the contracts that we have with the local authorities, and of course, that affects our margins in the short term. Of course, we are adapting ourselves to the new market conditions, and we are trying to compensate that through some efficiency programs to reduce our costs, both centrally and at the divisional and the contract level. We are also trying to increase our projects to help the clients to reduce the budget. Actually, there will be higher margins if we are successful. So in general, 2016 will not be an easy year, basically due to the strong market conditions. If there is no further questions from Martino, could we have the next question, please? The next question is from Joaquim Ferrer from Kepler Cheuvreux. Sir, please go ahead. Hi, good evening, everyone. Starting with Managed Lanes, I would like to know if you can I think I've read in the local press in Texas that there's an extension in the third Managed Lane in Texas in the I-35W that you are considering. I don't know if you can provide any color on that. Then maybe at a more high level, I don't know if you can elaborate a little bit on the strategy you are following to optimize the revenues in the NTE and maybe also in the LBJ. Not sure if you can share with us how well they are doing versus your internal projections, to what extent you are intending to favor toll increases versus maximizing traffic, and also whether you have decided to make any change versus what you initially expected. Then back to the service in the U.K. You have highlighted the fiscal consolidation as one of the things that put pressure on your margins. My question would be whether that is reflected already in the backlog or whether we could still see pressure on the top line. Finally, a clarification. I think you said that you expect something like EUR 200 million from the Chicago Skyway and the Irish toll roads. Is it EUR 200, the figure you mentioned? Thank you. I'm going to start with the last question there, so we'll do that in reverse order. The proceeds from the combination of the sales we commented should be around EUR 300 million, not EUR 200. Regarding the Managed Lane contract, yes, answering your question, we are negotiating the segment 3C. It's around $400 million or $500 million with TxDOT. The outcome of that, we are confident that we will reach an agreement, but we cannot confirm that yet. Regarding performance of traffic and revenues in NTE, I can't provide you with much more guidance because we don't provide internal projections. All I can say is that, and I'm repeating what Íñigo said, that we're very happy with the performance of the company, and it has exceeded our expectations so far. Well, this is Santiago Olivares again. I will answer the question on backlog and potential revenue evolution in the next year, and if we have been affected in our backlog. It has been, of course, affected, especially in the last quarter of the year. We experienced some reduction in volumes, especially in the local government clients, and that has been affecting our backlog. We grew this year, but we could have grown more in normal conditions. Going forward, we expect that, especially again for the local government business in highways, which is the area that will be more affected, we will see some decrease of volume compared to other years. This is something that cannot last for a long time because those are essential services, and even if we will suffer some months of decreased volumes, that need to come back in the future. Next question, please. The next question is from Antonio Rodriguez from BBVA. Sir, please go ahead. Hello, good evening. I had some questions on the Services division regarding the Birmingham contract. You mentioned in your report that there was a negative EBITDA contribution of EUR 110 million. I was wondering if you could provide us with the EBIT contribution from this contract in 2015. Also, if possible, what was the EBITDA and EBIT contribution from this contract in 2014? Regarding those EUR 76 million that you include, basically regarding a potential unfavorable resolution in the litigation. You also mentioned that you are including that, and you have mentioned in the call the revision of the contract's profitability going forward. I wanted to understand that point in the sense of, are you including the worst-case scenario because of what the client is demanding today, and that is it? Are you including that lower profitability going forward, some kind of estimate that you have, or is it specifically stipulated in the contract what that lower profitability could be as of today? If you can elaborate a little bit on that, it would be great. Thank you very much. Okay. I will try to address some of your questions. The first one was regarding EBIT. EBIT and EBITDA in this case is the same number, so you have the answer already there. Regarding EBITDA or EBIT in 2014, that was negative EUR 2 million. The year before, 2013, that was, let's say, a more normal year, was EUR 15 million. I think that you had a question about the level of provision and if this is the worst case or not. What we think is that we have registered in the P&L of this year the right level of provision, given the contingency that we have. Other than that, excluding that dispute and after the adjustment of the profitability to the end of the contract, this is a profitable contract. I do not know if there was anything else that you asked. You said the EBIT, the 2014 numbers, and if that is the worst case or not. I do not know if you have any further questions. No, that was exactly it. Thank you very much. Okay. Thank you. Next question, please. Next question is from Andy Jones for RBC. Sir, please go ahead. Good evening. Thanks for taking the question. I just had two, and sorry to go back to the Birmingham point. I just wanted to be very clear on the provision which you have taken. Is it unreasonable for us to assume that that EUR 34 million EBITDA loss would reverse in 2016? My second question was, I was just interested in hearing your view on the merits of entering different markets in services, particularly in Australia. What makes it a good market to enter, and why is it good to enter through acquisition given a potentially very short contract portfolio you could acquire versus organic growth? Thank you. Okay. Going back to the provision, the EUR 34 million element in the EUR 110 million are the losses during the year, and that is not going to be recovered. There are losses that have been incurred, and that will be there. The other question was about the Australian market, and I think that in our strategy, diversification of geographies is one of the key elements, and that is one of the merits of this potential acquisition. We will acquire new capabilities in new markets like natural resources, oil and gas, and other areas like telecommunication. Also that company will give us the entry point in other markets like the U.S. and Canada. Regarding the, I think that you mentioned something about the backlog of the company. Of course, this is less than the one that we have in the U.K. and Spain, because in Europe, the services sector is more developed, and we enjoy longer-term contracts, but that is something that we think will be replicated in the medium term in other geographies, including Australia and the U.S. Okay, thank you very much. Thank you. Next question, please. The next question is from Robert Crime from Insight. Sir, please go ahead. Yeah. Hi. Could we have some color on the ongoing margins that we could think about in terms of the construction business and the services business longer term, kind of beyond 2017? So, after the non-cash provisions have worked their way through the system in construction, and then kind of post some type of resolution on the Birmingham contract? Thanks. Well, thank you. This is Ignacio Mereles speaking. Thank you for your question, but as we say all the time, we are not in a position to give guidelines regarding the future. Having said that, I have to recognize that in construction, we think that the current margin that we have today, we are at the peak in the cycle, which means that you can consider lower margins for the time being. In terms of services, it depends where we are. I think that we can keep the current margins in the Spanish market. I think that in the case of the U.K., as Santiago mentioned before, I think that we have a different view on the U.K., at least in short-term basis for this year and probably next year, which means that the best is to keep the current margin, but we are not sure about that. Okay, thanks. Just maybe a follow-up in terms of the same for kind of long-term revenue growth, both in construction and services. Presumably in construction, the idea is to offset the declines in Webber post-finishing of the Managed Lane projects from elsewhere. Is that feasible over the next three or four years? Then, just going back to the services business, what could we expect there as a long-term kind of growth rate? Thanks. Depends what means long term, but I think that regarding 2016, the current year, I can say that we can keep, I think revenues stable on both businesses in construction and services. On long-term basis, we are positive, but as you know, for example, in the case of the construction market, it is even for us today, very difficult to predict what happens in three years' time from now. But I think that for this year, I think that we are positive in terms that at least we keep the same level of revenues. In the case of services, I think that is the same answer. I think that we are not in a position to share with you because we don't know what happens in five years' time from now. We presume that we can keep at least at the current level in terms of revenues and with a steady growth for the time being. Okay. Just in terms of the U.K. services business, do you think ex Birmingham, the market's slowing down? Is there a structural change, or is it just lower spending from the government over the next couple of years? Thanks. Well, the Birmingham thing is, as I said, is a one-off, and it's not totally connected to the market. Probably the only connection is that as the local government are suffering pressure, they are becoming more litigious. Other than that, the market will face difficulties, especially the public sectors in the next, I would say, 12 to 18 months because of the budget cuts that the central government is imposing in the local authorities. Okay, thanks. Next question, please. The next question is from Guillermo Fernandez of Banco Sabadell. Sir, please go ahead. Good evening, everyone. Thanks for the call. A couple of quick questions and a clarification. First one would be, I have been quite surprised by the dividends you received from services at the recourse level. Actually, it was EUR 78 million. I was wondering which were the source of that dividend, and if we could consider them recurrent. Second one would be, maybe one just if you could share with us which is the net cash position of Budimex in order to be able to adjust your cash position by minorities. Third one, just a clarification. Maybe it is my fault, I do not understand. What do you refer at also an SH130 when you say that they have not passed the effectiveness test? I just do not know what does it mean. Thank you. Okay. Guillermo, hello. I will start with the last questions. Well, basically, the effectiveness test is derived from the fact that you had an interest rate swap where the concession is paying fixed in a long tenor and has an underlying floating rate loan that is also long tenor. Since the debt is now currently being negotiated, all the terms in tenor, in interest and so on are changing, and therefore the cash flows of the interest rate swap do not match the underlying. So you have to make it speculative. There is nothing else to that. Then you also asked the question of Budimex. Well, it goes money into different numbers, but roughly, you are talking about something like EUR 450 million at the closing exchange rate. Now let us go to the rest of the questions. I will answer the dividend in services. Out of those total amounts, there are some of those that are one-off, like we have a special dividend coming from Murcia, our long-term project in collection and treatment of waste. That is around EUR 30 million. The rest, of course, there are always ups and downs, but I would say that the only that we could consider one-off is this Murcia element in the total. Okay. Thank you. Next question. The next question is from Olivia Peters from Berenberg. Madam, go ahead. Good evening, everybody. I just have two questions, please. Just going back to the services business, particularly in the U.K., given the budget constraints you talk about there, I was just wondering if you have seen any deferral in payment terms at all. Are you seeing that local authorities are pushing back their payments? My second question, please, is on Budimex. Obviously, there is a lot of growth in Poland at the moment, and that is reflected in your order backlog. I was just wondering if you could comment on the competitive environment there. I know in the past, when there has been growth in Poland, competition for projects has actually increased. Are you seeing that trend? Again, I think that the procurement law in Poland has changed. Are you seeing that change come through in terms of contracts being tendered on a best ability basis rather than on price? Thank you. Well, answering the question on deferral payments in the U.K. for services, we do not see that is increasing. The number of days is pretty much consistent with previous year. The only thing that is perhaps happening is that it is taking a little bit longer to get the certification done, but we do not see any meaningful delay in payments. Hi, Olivia, this is Ignacio Meridas speaking again. Regarding the Budimex market, I can say that I think that in the last 3 years, Budimex became the leader in terms of market share, being the largest company on civil works, mostly focused on highways in the Polish market. I think that we are very positive for the time being. In terms of competitors, I think during the crisis back 3 or 4 years ago, 2 or 3 big Polish companies came to bankruptcy. Now, I think that in any case, we still see that there are a lot of competitors, but I think that we can navigate in the current situation. We do not see an extra pressure from new players coming to the Polish market. I think that we are competitors enough, local companies and then international companies. I have to recognize that we don't see an extra pressure in terms of competitiveness for contracts. Okay. Thank you. Next question, please. We have no more questions for the conference call. Thank you. Well, thank you all for the Q&A session. Of course, if there are more questions, we will be happy to take them, and we will be visiting many of you in the coming days. Okay. Thank you so much, and we will be in touch.