Good afternoon, ladies and gentlemen, and welcome to Mota-Engil's first half 2022 results presentation. I will now pass the floor to Mr. Pedro Arrais, Head of Investor Relations. Please go ahead, sir.
Thank you and good afternoon to all, and thank you for attending this call where we'll present the first half 2022 results. With me, I have here Mr. Gonçalo Moura Martins, the CEO of the company, and Mr. Xiao Di, board member and responsible for planning and control. As usual, I will start the presentation with some key highlights. After that, we will present the results overview, and at the end, I will share with you the highlights about the detailed presentation with the concessions portfolio that we share today, and finally, the usual Q&A session. I ask you to move to slide 4, and as a snapshot, I would like to highlight the strong performance achieved by the company and the higher perspectives that opened for the upcoming years with the results achieved in this first half of 2022.
Beginning to look at the backlog, Mota-Engil achieved, in June, a new record level of EUR 9.2 billion, an impressive growth of 22% in just 6 months, and a turnover of EUR 1.35 billion that represents a growth of 19% year-on-year. Our profitability reached 15% margin, and our net profit was EUR 12 million, an increase of 37% year-on-year. In line with the guidance, the company made a CapEx of EUR 108 million, while our net debt slightly decreased to EUR 1.1 billion, with our gearing improving to 2.6. Moving to slide 6, you can see here the breakdown of the P&L.
It's important to mention that the EUR 1.35 billion of turnover and the EUR 207 million of EBITDA represents the best ever performance in the first half. Net financial results roughly stable, and the minorities were mainly related, as usual, with Angola, Mexico, and Environment. All in all, the net profit reaches EUR 12 million, the best net profit in the last six years. Moving to slide 7, here you can see the contribution of each business unit to turnover and EBITDA. Starting by the engineering construction business, the European division showed a stable activity with a small decrease, reflecting the sale in January of the companies in U.K. and Ireland.
In Africa, it's important to highlight the strong growth of 54% in turnover and 14% in EBITDA in the first half of 2022, reflecting the starting stage of new projects that will contribute to a solid growth in the upcoming years. In Latin America, the company reached an impressive growth in turnover of 36% year-on-year to EUR 430 million and a growth of 33% in EBITDA. A strong performance driven mainly by the operations in Mexico and Peru. Finally, in Environment, Mota-Engil achieved a 9% growth in turnover and 19% increase in EBITDA, showing a stable activity and margins above 30%, with international front growing already in the first half of 2022, in line with the goals established in the strategic plan.
At last, considering Mota-Engil Capital as the business unit with assets outside of engineering, construction, and environment, the turnover achieved was EUR 48 million. Moving to slide eight, here you can see the strong evolution of the backlog that will increase the company to higher levels in the full year of 2022, considering also the EUR 2.2 billion contract signed recently, and of course not included in the EUR 9.2 billion reported at June. Important to highlight that the recent contracts awarded are in core markets such as Angola, Mexico, and Brazil, where the company has a long presence and the contract with an execution period from 18-36 months. That will put the company in the upcoming years in a higher standard of activity.
Very important to mention the growth of backlog in regions such as Africa and Latam with, on average, with higher margins compared to Europe and with larger average contract size, which is positive for the outlook of the profitability and the stability of the cash flow generation. In slide nine, as usual, we will not elaborate on that, but you can see that the average size of the contracts are increasing in the recent years, and 75% of these listed contracts are located in what we consider our core markets, accomplishing what we announced last November with the presentation of the new strategic plan, when the company assumed that we will be the focus on the eight core markets that will be the main efforts in terms of our commercial activity, despite continuing to analyze good opportunities in other markets. Moving to slide ten.
Here we can see that the company made a total CapEx of EUR 108 million with growth and long-term contracts representing 51%, mainly channeled to Africa, the railway project in Mexico, Tren Maya, and in EGF, the waste treatment company in Portugal. Important to mention that despite the significant increase of the operational performance, the company has a stable level of CapEx aligned with the guidance and reflecting a careful selection of contracts with focus on size and profitability. Moving to slide 11, here you can see the balance sheet at June, and here we can see that the company reinforces its equity by 34%, leading to a positive, very positive evolution of the equity ratio. Important also to mention here the consolidation in the recent years of the improvement on the working capital evolution. Moving to slide 12.
Here we can see that even with the seasonality effects, we managed a reduction of the net debt with a solid operating cash flow of EUR 143 million. Looking to the debt position, we can see here, that our gearing improved to 2.6 times with the combined effect of increasing EBITDA and reducing debt. Worth to highlight from the debt with maturities less than one year, that EUR 339 million is already refinanced or be refinanced shortly. That represents roughly 53% of the non-revolving financial needs for the next twelve months. Also, in June, the company reflected an increase of the average cost of debt, aligned with the recent evolution in the international financial system.
Finally, I would like to mention that the financial strategy will continue to focus on strengthening the balance sheet, improving the gearing, and extending the debt maturities to support the growth perspectives for the next years. Let's move to slide 15 to see the overview and outlook for each business unit, starting by Europe in slide 15. The turnover in the engineering construction division in Portugal showed a strong evolution with a growth of 18% year-on-year. At the EBITDA level, the company achieved 6% with a negative impact of higher costs related to the present context of inflation.
Nevertheless, after the implementation from the government of a very important mechanism of price revision, the company, and I would say all the industry, expects that the compensations established by the regulation published can turn into a reality, and with due compensation in the second half of 2022. In Poland, with the existing scenario in Europe, Mota-Engil is implementing a very selective criterion in project tendering due to a strong volatility in the region. As we mentioned before, the sale of the UK and Ireland business reduced the contribution of Europe in the first half of 2022, but allows the company to have a greater focus in the main markets in line with the strategic plan goals.
With a backlog of EUR 974 million, and with positive perspectives, mainly in Portugal, the company expects to boost activity in the upcoming years, having, at the moment, the cost control as a priority and being focused on new opportunities after the recent award of the new hospital in Lisbon. Moving to slide 17. In Africa, the turnover registered a very strong performance in the first half of 2022, with an increase of 54% year-on-year, and with an 18% margin reflecting the initial phase of some contracts, namely in Angola, Uganda, and Ivory Coast. Another item to highlight is the very positive results from the business development department reflected in the recent contracts awarded that bring the backlog in Africa to a record level, after the awards achieved already in the first quarter of this year.
These record levels allow the company to have a very positive outlook for the next years, considering the average size of the contracts awarded us. Although the focus will be in the execution, the pipeline remains strong with the commodities price opening new opportunities in Africa. Moving to slide 18. Latin America showed an impressive growth of 36%, with Mexico's main market in the region posting an increase of 41% year-on-year, and with Peru also achieving a very positive growth of 55%. With the growing execution pace of the first stretch of the Tren Maya, our railway project in Mexico, and the positive contribution from the energy business, the company expect to achieve a strong performance in the second half of 2022.
Looking to the future, it's important to highlight the achievements, also in Latin America for record level of backlog in the region with EUR 3 billion, setting higher activity levels for the upcoming years and the consolidation in the top 10 in Latin America region, where Mota-Engil is nowadays the seventh biggest construction company in the region. Moving to slide 51. In the environment and services, the turnover was up 9% year-on-year to EUR 220 million, and EBITDA was up 19% year-on-year to EUR 71 million. Reflecting mainly a higher contribution from the international activity, namely in Africa, that allows all in all to achieve an EBITDA margin of 32%.
Important to mention that in the international activity that the company obtained in the first half of 2022, a permit to operate its first landfill in Brazil, and is a good example of the work done to increase the footprint of the environment, environmental business in markets where the company has already presence, growing in this sense with cross-selling of services. Mota-Engil Capital, that is in slide 23. We can see the contribution of EUR 48 million for turnover. We should consider the implementation of the strategy to sell the non-core assets, and Mota-Engil achieved this goal with the sale of the cargo and hospital concession.
To the future, Mota-Engil Capital reshapes its business with the creation of two new brands, one in real estate and another one in maintenance, landscape and sustainability, to envisage the improvement and higher profitability of this division. Finally, moving to the final remarks and outlook, and starting by the final remarks in slide 25. The company achieved a record level of turnover and EBITDA, and with the best net profit of the last six years. Also a record level of backlog of EUR 9.2 billion that supports higher levels of activity for the upcoming years. The debt control is important to mention with the improvement of the gearing and the net debt reduction despite the business seasonality.
For last, as approved in the annual shareholders' meeting, the second tranche of the dividend will be paid with the full achievement of the milestones required for the net profit in the first half of 2022. Looking to the outlook in slide 26, with achievements in the first half of 2022, the company updated the guidance of turnover for the full year of 2022 to the range of 10%-20%, comparing to the high single-digit growth that we presented at the beginning of this year. Here I would like to remind you that the strategic plan for 2022/2026, we estimate an annual growth rate in average of 8%. With the production pace that the company achieved in the first half of 2022, we will surpass, without any doubt, for the goal of the full year of 2022.
EBITDA margin is expected to be stable in full year of 2022 in line with 2021 levels despite the inflation pressure. Backlog is expected to stand at record levels as it is, but we expect to sign additional contracts with relevant dimension until the end of this year. Before we move to the Q&A session, I would like to mention that together with the earnings release, the company shared today to the market a detailed presentation of its concession portfolio. As we have mentioned at 2021, when we presented the strategic plan, we informed the investors that we will give more visibility of our concession assets. With this purpose, Mota-Engil presented today its portfolio of 17 concessions and with all the relevant information.
We can see in the detailed presentation, and specifically in the slide 6 and 10 of the document, all the assumptions that allow us to have an internal base case valuation of EUR 750 million for 100% of the assets. Considering 3.4 times the book value and using an average discount rate of 10.3%, in which we consider a valuation of EUR 472 million attributable to Mota-Engil. The company, of course, will be available to provide information and answer to any doubts to help the analysts and the investors in general to understand what we consider a very relevant and hidden value in our portfolio of concessions. Now, we will start with the Q&A sessions. Thank you.
Ladies and gentlemen, the question and answer session starts now. If you wish to ask a question, please press zero one on your telephone keypad. Thank you. The first question comes from Filipe Leite from CaixaBank BPI. Please go ahead.
Hi. Hello, everyone. I have three questions, if I may. The first one regarding results presentation and looking at your cash flow page on page 12. If you can elaborate on the EUR 32 million called others. If you can give us any details regarding these EUR 32 million. Second question on tax, and if you can explain to us the reasons for the so high implicit tax rate in first half and your view on tax for full year. Last one, regarding the concession portfolio presentation, if you can provide us the required equity investment in those concessions for the upcoming years, which I believe is already included in your NPV calculation. If you can give us also the expected dividends to be collected by Mota-Engil in this year and next one from this concession. Thank you.
Hi, Filipe. How are you? Thank you for your questions, and thank you for your always very attentive. First question, the other is related with the sale of a small stake in the Gran Canal concession in Mexico. Basically it's that, all the value is related with that. The second question about the tax rate. Yes, I feel the same. It's very high, but it is what it is, we are very conservative when we do the calculations for the first half, and of course, we try to optimize that as best as we can. Of course, under the rules and laws applicable because we have a lot of jurisdictions in which we have activities, some of them with higher rates than we have in Portugal.
Some results are done on those jurisdictions in which we don't have formal agreements with Portugal in terms of taxes. Normally lead us to this very high tax rate that we are of course estimating now. Again, it's a very conservative estimation. I think we are going to be able to optimize that at the end of the year. The second point is as important, as you know, a lot of costs are not considered. The costs, tax costs eligible for tax credits.
Otherwise, all the jurisdictions to maximize their tax collection, they create alternative ways of autonomous taxes, methods in order to regardless that if you have profits or not, they will charge, and they will tax some costs that the company has. Again, regardless if you have losses or profits. The third one, yes, you are right. Of course, the commitments that we have for equity in some concessions, three of them not yet in financial close process or some already have the financial close done, but yet with some commitments of equity are considered in, of course, in the NPV.
Of course, the valuation considered of course, not only the equity that we already have invested but equity that we are having to invest in the future. The amount I don't have here with me precisely, but I think it's less than EUR 100 million for sure.
Thank you very much. Ladies and gentlemen, let me remind you again, if you have any question, please press zero one on your telephone keypad. Thank you. The next question comes from Diogo Márcio from SCM. Please go ahead.
Hello, everyone. I have three questions. Basically the first one refers back to slide 12 regarding the level of debt. If we look at the gross debt and globally, we reach 1.8 with an additional EUR 668 million, which will represent roughly EUR 2.5 billion. The question with this current instability and expected rate hikes from central bank, what would basically be the impact on your financials for every 1% raise? Will you still be able to maintain the dividends for shareholders in the next three years? That is question one. Question two, when I look at the debt more closely, I can see that there are some assets that are listed for...
L iabilities and assets held for sale regarding some investments, notably in subsidiaries, and Lineas subgroup and subsidiaries. The question is, does this investment carry any level of debt? If yes, would they impact basically Mota-Engil's balance sheets? And what would be the EBITDA ratio if they are not managed to be sold? Question three, is there any plan or strategy to increase the liquidity in the stock trading, as volume have been on average quite low for the last years?
Okay. Hi. Sorry. You asked three questions. I missed the second. The first one is about the debt and the impact of increase of the taxes. They are the rates. The second I think I missed it.
The second one. The second one is regarding the debt more closely. In section 28 of your annual report of 2021, you have some listed assets and liability that are held for sale concerning some investments. They're obviously today registered as equity consolidation. The question is, does this investment carry any risk for the group in terms of debt? If yes, how does it impact the obviously Mota-Engil group?
Okay. Thank you. First question is that half of our debt is fixed rate. The impact of the fluctuation will obviously have some. But we estimate even if the interest rate could be higher than we imagine 1.5%, 2% higher, the impact will be roughly 6% of our financial cost today. Something like that. It's totally bearable. The second point is about if that impacts the future payment or payment of dividends. No.
Even with this context, if the second half is going as we forecast and the numbers that we have already from July and August, there is no risk whatsoever that the company will not be in position to pay dividends, but that of course will be the final decision of shareholders. The other point is, the same listed assets that we have held in for selling. If there is any possible constraint or liabilities towards the balance sheet of the company, no, there is none.
Third one, of course, if they are held for sale, we can do that in order, in the future, with no pressure whatsoever, but in order to optimize the assets of the group. Sure, we can go to the market if you have good proposal in order to sell them and to of course apply the proceeds from those sales to reduce debt. The third last question is all, no? S orry, about the free float, the small free float. It's the story of the company.
O f course, we can. The lower liquidity of the shares of course is related with small free float that we have, and the special condition of the market is all the geography that we have. We are not envisaging or planning to do anything related with that.
Thank you. Your next question comes from Luís Delgado, from Banco Finantia. Please go ahead.
Hello, good afternoon. Congratulations for your results, first of all. A couple of quick questions. The first one is, what will be your forecast in terms of operating cash flow for the second half of 2022 and with the current inflation situation? The second question could be, can you provide a little bit more light about the plan to do with the rest of your debt? Because you said that EUR 339 million you already refinanced, but you have EUR 294 and EUR 147 pending to be refinanced. You can provide a little bit more light with that. Thank you.
Hi, thank you for questions. Let me be very clear about the first questions. You are asking for a guidance for the second half, a cash flow, operating cash flow for the company. We never do that normally. What I can comment on that is that always the trend of the company for the last forever. F orever, since I have memory of that, normally the second half is always stronger than the first one. At least we are expecting, we are forecasting a better cash flow than the one that we got on the first half. Regarding the refinancing plan, we of course are addressing and we are doing that what we'll do normally, every year.
We have some cash availability, we have revolvers with the bank, we have liquidity facilities that we are managing in order to optimize the best maturity with the best cost of funding in order to refinancing. We do not envisage any kind of problem to refinance that is already forecast for the end of the year is EUR 294 million.
Thank you. The next question comes from Daniel Gandoy from JB Capital. Please go ahead.
Yes. Good afternoon, everyone. Two questions if I may. The first one is if you could provide us with implicit price to book multiple in the sale of the Gran Canal disposal that you announced. Second, if you can tell us if you have some plans to crystallize the value in the concessions business. I mean, thinking about maybe selling a minority stake in the concessions business or selling some of the more mature assets to help in terms of crystallization value. Thank you.
Hi, Daniel. Thank you for your question. We cannot give the details of the sale of Gran Canal. In that's very small stake that we did, as you can imagine, because that will disclose some grounds for evaluation. It's for us a little bit difficult to share with you. What I can say about it is that as we announce in our business plan is that we are going to have a very opportunistic and casuistic asset management towards our concessions portfolio. As you know, what we have been doing for the last five, six years after we sold Ascendi is to build slowly again, rebuild, I would say, our core concessions portfolio.
Because our experience, our 20 years of experience concession is that the big premium, the big value is in the greenfield. Is when you go to a tender, a public tender, a concession tender, and we have, we support and bear all the risk to finance, to design and to build. When you complete that phase of the concessions of course, the value that you can extract for that is the premium is very high, as we are seeing here. That is what we are trying to show to the market today. What we are going to do in the future is to have a very opportunistic look and asset management towards this portfolio.
We can keep it, we can sell it, we can sell part, we can open to partners. I don't know. What we are going to do, it's an important value that we have. Let's do this management of these important assets the better way that we can. We, as we did in the past. Basically, we are proud, of course, to show to the market how we could rebuild this portfolio in such a short time after the selling of our important assets in the past, as Ascendi was.
Okay. Very clear. Thank you very much.
Thank you. The next question comes from João Vermelho from JB Capital. Please go ahead.
Hello. Good afternoon, everybody. Always a pleasure to be on the call. First of all, congratulations for the results. They were very good, including the cash flow. I have two questions. One is more simple one, which is related to working capital and the level of advanced payments from clients. Mota-Engil managed to continue to have negative working capital, which is quite an achievement. The question is this negative level or close to zero working capital sustainable in the long term, or do you expect some deterioration so that working capital gets to a more normalized level? And related to that, I would like to know how much the advanced payments were in the first half of the year.
The second question is a more precise one, and I think Gonçalo will like to answer that question. It's regarding the Lisbon Airport, the new airport. We've learned or read a lot of contradictory news regarding the airport. The question is, do you think the tender will start in 2023? Do you think there is a chance that an award will be made in 2023? And how likely do you think that Mota-Engil is to win that award? Thank you very much.
Hi, João. It's always my pleasure to talk with you and to have you here. First of all we are managing to have this negative cash flow, which is quite an achievement in this business as you know very well. What I can say is that, of course, we have a goal in our business plan that the cash flow shouldn't be negative, but not higher than 7%. We are far from that goal. As far as we can be from that goal is the better way to proceed. Nevertheless, we have that goal because, of course, the needs of investment for the future for us also will be large, as you can imagine.
The second point, related with this point as well, the net advance payments between what we receive and what we pay for suppliers is EUR 150 million in this first half of 2022. Airport. It's I don't have a crystal ball, but what I can say is that if there is going to be an airport in Montijo, then under the concession of VINCI, for sure, Mota-Engil will participate. Because we have agreements as a contractor and with VINCI constructions. We bid for the price. We have a pre contract agreement signed. All agreed. The question mark here is there is going to be an airport in Montijo or not.
Of course, I think there is no other solution. If, in a very pragmatic way, if we look for the alternative, the only one that can address the incredible speed up of the traffic in Lisbon is Montijo. They can talk about how good those would be Alcochete or is, or how logical is Beja or what or whatever, all those locations. The only location that could address the most quickly possible this huge increase of demand of the air traffic in Lisbon is Montijo. No one can ensure that will happen.
Our expectation is if it is going to happen under the actual concessions of VINCI, the expectation to have to be involved in the construction is very high.
Could it be otherwise, so not under VINCI's concession?
I read what you read, João. If you read, if people talk about the new, totally new airport investment, someone say that could be outside that concession, which would be a very complicated legal dispute. Of course, it's very difficult to be outside that concessions for 50 years after signing, has the monopoly of all the airports in Portugal and Azores and Madeira.
Okay. Thank you very much. Very clear, Gonçalo.
Thank you. Dear speaker, there's no more questions.
Okay. If there is no other question, guys, thank you so much for attending. There are more questions, please go ahead.
Yes, we have one more question. Thank you. The next question comes from Kim Bolton from Portfolio Solutions. Please go ahead.
Hello, good afternoon. My questions are that-
Considering that Mota is principally financed by Portuguese banks, and given that these banks have a limited capacity for funding single clients, what is CCCC doing to help Mota diversify its financing sources, and at what cost? Also, if CCCC is bringing in new finance, is this to refinance existing projects or to fund new ones? Thank you.
Okay. I'm Xiao, and I'm happy to answer your questions. The answer from my side is yes, we will bring more finance opportunity and channels to Mota-Engil. Actually, we have already completed with some cooperation from China from the supply chain perspective. Also our most important strategy is to finance the project and to find more synergy between the Chinese investor like CCCC and also Mota-Engil. In the third country like in Africa and also in Latin America. Actually, we have already started the negotiation of more opportunities, and we cherish this opportunity. We are foreseeing a large potential, huge potential of our future cooperation.
Okay. Thank you very much.
Okay.
Thank you. There are no more questions.
If there is no more questions, I would like everyone to thank you to attend our call. Some of all of you are longtime friends. I hope that you have all the information that you need about the company and this first half of results. Nevertheless, personally, I'm always available for you if you have other questions or our team of investor relations, Pedro and Maria. We are always available to answer any questions or to give you some clarifications that you need. Thank you so much again to attend. Bye-bye.
Thank you. Bye-bye.
Ladies and gentlemen, thank you for your participation. You may now disconnect your lines.