Good evening, ladies and gentlemen. Thank you for standing by. Welcome, and thank you for joining HOCHTIEF Half Year 2022 Results Conference Call. Throughout today's recorded presentations, all participant will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Mike Pinkney. Please go ahead, sir.
Thanks, operator. Good afternoon to everyone, and thank you for joining this HOCHTIEF results call for first half of 2022. I'm Mike Pinkney, Head of Corporate Strategy, and I'm here with our CFO, Peter Sassenfeld, and our Head of Capital Markets, Tobias Loskamp, along with other colleagues from the senior management team of HOCHTIEF. We look forward to taking your questions, but to kick off, our CFO is gonna run us through the key aspects of our performance during the first half. Peter, all yours.
Thank you, Mike, and the team. Good afternoon to everyone, and thanks for joining us for this call here. Let me begin by highlighting that last week, the supervisory board of HOCHTIEF unanimously elected Juan Santamaría as HOCHTIEF's new Chief Executive Officer. Juan succeeds Marcelino Fernández, who has led the company since November 2012. The change is part of a structured succession planning process. Mr. Santamaría has many years of international industry experience in various business segments, and most recently served as CEO of CIMIC from February 2020 until May 2022, as well as executive chairman of CIMIC since November 2020. Since May 2022, he has been CEO of ACS, where he began his career in 2002 after studying civil engineering in Madrid. We look forward to introducing him to you in the coming months.
Marcelino Fernández had been a member of the group executive board since April 2012, and chairman of the executive board since November 2012. HOCHTIEF sincerely thanks Mr. Fernández for his outstanding contribution to the development of the group during his time at HOCHTIEF. Let's turn to the key highlights of this set of results on Slide 3. HOCHTIEF achieved a robust performance during the first half of 2022, with further order book growth and solid cash flows accompanied by firm profit growth, notwithstanding the challenges of the current environment. Sales increased by 16% to EUR 11.9 billion and were 8% higher in FX-adjusted terms. Operational net profit was up EUR 44 million to EUR 249 million, an increase of 21% year-on-year, with nominal net profit rising 24% to EUR 240 million.
Margins remained firm and the profit contribution from our stake in toll road operator Abertis increased by EUR 13 million year-on-year to EUR 26 million, with H1 2022 traffic volumes 4% above the H1 2019 pre-COVID level. Underlying net cash from operating activities was broadly stable year-on-year, with a positive momentum in the second quarter. At the end of June 2022, HOCHTIEF had a net debt position of EUR 35 million, an improvement during the quarter of over EUR 300 million. Over the last 12 months, order intake has remained solid across all divisions, and the group's order book stands at over EUR 52 billion, up by EUR 4 billion since December 2021.
On the 10th of June, HOCHTIEF attained 100% ownership of CIMIC Group Limited as a result of the takeover offer launched in February for the 21.4% free float minority shares of CIMIC. The EUR 940 million investment in CIMIC shares has been partly financed by a EUR 406 million 10% capital increase carried out via an accelerated book building process on June 8th , supported by our main shareholder, ACS. The balance of the investment in CIMIC will be financed with debt and existing cash. Moving to Slide 5, we can evaluate the cash flow trends. Underlying net cash from operating activities was broadly stable year-on-year at EUR 63 million, with a solid last 12 months level of EUR 742 million and with positive momentum in Q2 2022.
The figures are adjusted to exclude the Q2 EUR 227 million cash out impact from CIMIC's CCPP settlement announced in April. Net operating CapEx stood at EUR 63 million, driven mainly by job-costed tunneling equipment, which continues to be purchased and deployed at CIMIC. Free cash flow from operations was solid in Q2 2022 at EUR 525 million, last 12 months with EUR 659 million. On Slide 6, we can look at the cash development on the balance sheet. At the end of June 2022, HOCHTIEF had a net debt position of EUR 35 million. Adjusting for the EUR 534 million investment in CIMIC shares, net of the HOCHTIEF capital increase, as well as other non-operational items, net cash would stand at EUR 720 million.
The year-over-year increase on this comparable basis would be EUR 287 million after having paid EUR 312 million of dividends. On Slide 7, you can see how the group's orders have developed very positively. The group's order book stands at over EUR 52 billion and is up like-for-like by EUR 4 billion since December 2021 or EUR 7.5 billion year-over-year. Over half of the backlog, exactly 55%, is located in North America, with a further 37% in Asia-Pacific region and an 8% in Europe. New orders of EUR 14.4 billion shows an increase of 7% like for like, led by strong growth in Americas. Over the last 12 months, order intake has remained solid across all divisions, amounting to 1.1 x work done.
On Slide 8, we show some of our major recent project wins, of which I would like to mention. In our Americas division, Turner sustained its strong position within the health and education sectors and was awarded, among others, a $225 million contract to deliver a health education building at the campus of the University of Kentucky. With the construction of the Dallas Airport main runway now complete, Flatiron has begun work on a project to provide dual taxiways between the runways. Furthermore, Flatiron has secured a runway project at Denver Airport. In Europe, we were awarded earlier this year a power tunnel project in Wales. The contract is worth EUR 240 million and will reduce the visual impact of the existing overhead lines upon completion.
At CIMIC, CPB Contractors joint venture has won AUD 167 million project to build a new western section of the M12 motorway with direct access to the new Sydney Airport. CIMIC subsidiary, Pacific Partnerships, has acquired the development rights for a 245-hectare solar farm with an installed generation capacity of up to 125 MW with UGL to undertake the construction, operation, and maintenance. Meanwhile, Thiess has won several resources sector services contracts in recent months. Now let's look in more detail at Americas. HOCHTIEF Americas has delivered a solid set of results in H1 2022, accompanied by firm order book growth. Sales year-on-year of EUR 7.9 billion were 19% higher than the corresponding period of H1 2021, an 8% increase FX adjusted.
Operational PBT of EUR 181 million was 10% above the previous year with a solid margin level. The division's net cash from operating activities pre-factoring in H1 2022 reflects seasonality and timing effects. The Q2 2022 figure was strong at EUR 245 million. The comparable Q2 2021 figure was exceptionally high due to the completion of a large project in that period. The robust balance sheet at HOCHTIEF Americas showed at June 2022 net cash position of EUR 1.5 billion, up from EUR 1.1 billion at the end of March. At the end of the period, the order backlog stood at another record high of EUR 28.6 billion, up 22% year-on-year or 7% FX adjusted, with an absolute increase of over EUR 5 billion since the start of the year.
New orders secured during H1 2022 reached EUR 8.2 billion, up by 21% year-on-year or 9% FX adjusted, with work secured in the last 12 months representing 1.1 times work done. Our Americas business remains very well-positioned, and we reiterate our operational guidance for 2022 of a pre-tax profit of EUR 350 million to EUR 370 million. On Slide 10, we have the Asia Pacific division, and we can see the positive performance of CIMIC. Revenues increased by 9% to AUD 5 billion in H1 2022, driven by growth in Australian construction and services.
Statutory NPAT of AUD 200 million is 6% higher year-on-year on a comparable basis, which adjusts for the fact that the Ventia stake of 32.8% is accounted for from March 31, 2022 as a financial investment compared to the prior year when the stake was 47% and was equity accounted. The statutory NPAT figure includes the compensating impacts of the CCPP settlement and the Ventia change to fair value investment, both of which occurred in Q1 2022, net of provisioning. Underlying operating cash flow pre-factoring improved by almost AUD 430 million year-on-year, with EBITDA cash conversion pre-factoring during the six-month period reaching 83%. Or 100% excluding LatAm Asia. Net debt improved by AUD 134 million year-on-year to AUD 364 million. CIMIC continues to have a solid investment-grade rating from S&P.
The period end order book stands at AUD 29.5 billion, a 7% increase on a comparable basis since December 2021. We continue to expect CIMIC to achieve an NPAT net profit after tax for 2022 in the range of AUD 425 million-AUD 460 million, subject to market conditions. Moving on to Slide 11. Let's look at Europe. First half sales of EUR 604 million are stable year-on-year with work done up 2%. Operational PBT of EUR 27 million was slightly higher year-on-year with a solid margin. Net cash from operating activities reflect the characteristic seasonality of the first half of the year. The last 12 months figure is a cash inflow of EUR 36 million.
At the end of June, the division's balance sheet maintained a solid net cash position of EUR 675 million. The level of new orders in the period of EUR 451 million was mainly influenced by market and timing effects with a book-to-bill ratio for the last 12 months of 0.9 x. The divisional order backlog ended June at EUR 4.2 billion with good visibility of 13 months. For 2022, we maintain our operational PBT guidance for Europe at EUR 45 million-EUR 65 million. On the next slide, we summarize the strongly improved performance of Abertis. Abertis average daily traffic in H1 2022 was 18% higher year-over-year, reflecting the continuing recovery of traffic levels. During the first half of the year, traffic achieved levels 4% above those of pre-COVID H1 2019.
H1 2022 operating revenue rose 21% year-on-year to EUR 2.4 billion, and EBITDA increased by 27% to EUR 1.7 billion, both on a comparable basis. Abertis net profit in the period, pre-purchase price accounting, was EUR 285 million, a 9% increase year-on-year. The profit contribution from our stake in the toll road operator increased by EUR 13 million year-on-year to now EUR 26 million. Abertis declared a dividend of EUR 602 million in April 2022, of which HOCHTIEF received its share of EUR 119 million. The expected total payout for the three-year period, 2022 to 2024, is EUR 1.8 billion, including this April 2022 payments.
Looking forward, we continue to expect that our Abertis investment will make a positive profit contribution to HOCHTIEF in 2022. In summary, HOCHTIEF is well positioned for the future based on solid long-standing positions in its key local markets, its geographical diversification and the de-risked order book. The global economy is currently facing macroeconomic challenges, including inflationary and supply chain pressures. HOCHTIEF is actively managing these challenges together with our clients and partners. Our unchanged guidance for 2022 is for an operational net profit in the range of EUR 475 million to EUR 520 million, an increase of between 5% and 15% year-on-year subject to market conditions. Thank you very much then to everybody for listening, and I now welcome your question.
We're ready for questions, operator. Thank you.
Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from Luis Prieto of Kepler Cheuvreux. Please go ahead, sir.
Good afternoon, gentlemen. Thanks a lot for taking my questions. The first one is regarding the margin dilution that we have seen sequentially in the U.S., for example. I think we've seen the same thing in Asia Pacific, but in the U.S. it's more obvious. Why is that? Because also I'm seeing a significant increase in revenues. Is it because we're seeing inflation inflating, excuse me, the word inflating the revenue figure and cost inflation then leading to the same EBITDA or are we seeing a different dynamic here? The second question is regarding guidance.
I see that you're not moving your guidance despite the fact that your currencies have moved in a positive direction, particularly in the U.S. and actually your Asia Pacific guidance is in Aussie dollars. Just because of translation impact, your guidance could have been higher. If you could shed some light here, that would be very useful. Thank you.
Luis Prieto. Hi, it's Mike Pinkney here. Thanks for your questions. First of all, on margins, you're asking specifically about Americas. You may recall that in the first quarter of 2021, Americas reported a particularly high margin. If you look at the second quarter figures, you can see that basically margins are stable year-on-year. At the PBT, the operational PBT level, which we tend to focus on, you're about 2.1% in both this quarter and a year ago. But also, I mean, if you look at the EBITDA in the second quarter, sales are up 29% and the EBITDA absolute is also up 29%.
I think there's a little bit of Q1 2021 base effect, if you're looking at the first half overall. If you just look at the Q2, things are pretty stable. You know, as I said, we've, or Peter said, apologies, you know, we've reiterated our guidance and we're confident on the outlook for Americas. It's also true more generally at the group level, that you've seen some impact on EBITDA margins at the Asia Pacific level, but that's mainly due to a lower operational profit contribution from Ventia, because of its reclassification as a financial asset.
On the second question on guidance, look, you know, we've got a reasonably wide range, EUR 475 million to EUR 520 million for 2022 operational net profit. As you know, Luis, there's a lot of moving parts here. The macro environment, obviously, has become more challenging since the end of February. Undoubtedly, the CIMIC transaction is earnings accretive. In the short term, the impact is more modest because you've got financing and also transaction costs. Furthermore, the reclassification that we mentioned there from Ventia being accounted for as an equity to now being a financial asset also has an impact on the numbers. You know, overall, we're comfortable with the guidance range. We think it's a solid set of numbers, and we'll take it from there.
Excellent. Coming back to my first point regarding cost inflation. We're not seeing the impact of cost inflation on the top-line numbers to any extent. Inflating those top-line numbers, and therefore the margins being diluted as a result of that.
No, not at the moment.
None of them. Okay.
As you know, our Americas business is 90% Turner, which is cost plus fee. We're able to manage the cost inflation pressures very well, in particular because of the business model there. No, not for the moment. That's not something we're seeing.
Okay. Thank you.
Thanks, Luis.
The next question is from Victor from Actinver . Please go ahead.
Hi. Good afternoon, Victor at Actinver . I have two questions. The first one is as a category on brief on Americas, the recovery and order in the second half, how are you thinking the business evolving? The second question is on Slide 10, analyzing the a part of CIMIC 200, just slightly below the 50% for the full year guidance. What are you expecting that the second half is going to contribute more? Is it more mix or is it more the underlying business construction and services in order to reach the guidance? Thank you.
Victor, hi, it's Mike here again. Thanks for your questions. The line wasn't great, but I think that the first question you were asking a little bit on sort of the outlook for Americas. I mean, you know, in general, things appear pretty positive. We've got an order backlog which, okay, is up 22% year-on-year, and obviously there's an FX effect, but even adjusting for FX is up 7%. And new orders have also been pretty strong. In fact, in the second quarter in U.S. dollars, we were sort of at the $5 billion level, which is not a level we've seen in recent quarters.
More generally, I mean, the data center segment continues to grow very strongly, fueled obviously by the shift to the digital economy. It's in fact now the largest segment in Turner's order book. It represents 21% of the total order book. You can see this on Slide 23, where we've got the order book, order backlog breakdown in building and civil in the Americas division. Data center is now the largest. But the other areas such as healthcare continuing to see growth, clients building bigger hospitals in addition to other things like freestanding emergency rooms, senior living facilities. That's now, you know, that's around 20% of Turner's order backlog currently.
Education, which is a further 20% of the backlog, is gonna benefit from an influx of public funding. For example, in California, they allocated over $4 billion for school modernization and new construction over the next two years. The top five states overall in this segment have got about $10 billion of work earmarked for the next few years. Things there are looking good. For Flatiron, the North American infrastructure market continues to be good. It's shifting more and more towards low-risk, negotiated, collaborative delivery-type models in all geographies.
Of course, we've got the EUR 1.2 billion infrastructure stimulus that's going to we think bring additional infrastructure opportunities, infrastructure investment opportunities in 2023 and beyond. Overall, we're very confident about the outlook there. In terms of you were asking about CIMIC, they as you said that the NPAT was about EUR 200 million. It was up 6% year-on-year. You know, we've reiterated the CIMIC guidance that CIMIC last gave in their Q1 results when they were still quoted. We've repeated that guidance of EUR 425 million to EUR 460 million. There's also a bit of obviously second half seasonality that we're expecting there.
Furthermore, Ventia's earnings contribution will increase towards the end of the year, as basically you're reflecting in the P&L, the dividends, as opposed to the equity consolidated profit that you had last year, and we expect those will be paid out probably in the fourth quarter. With all those sorts of aspects put together, we're confident on the CIMIC guidance as well.
Okay. Thank you.
The next question is from Marcin Wojtal from Bank of America. Please go ahead.
Yes. Good afternoon. Thank you for taking my questions. Firstly, it's on CIMIC. Can you confirm that you actually received dividends from Thiess in the second quarter, and that explains part of the improvement in the operating cash flow? Can you also confirm what was the amount of these dividends from Thiess? Question number 2, can you comment on factoring? If I'm reading your statement correctly, there was about EUR 100 million or EUR 120 million boost to cash flow in the second quarter from higher factoring. Is there any change in your strategy? Is it going to increase because sales is increasing? If you could comment a little bit.
Maybe lastly, has there been any cash out already on the project in Chile where you announced a write down at the end of last year? Has any of it come out? If not, when could that hit your cash flow? Thank you.
Martin. Hi, it's Mike here. Thanks for your questions. The dividend received from Thiess was around EUR 90 million. That was, I think, included in the cash flow. In any case, if you look at the Asia Pacific slide that we show you there on Slide 10, which is basically the CIMIC numbers, obviously, you can see that the operating cash flow pre-factoring is up by about EUR 430 million year-on-year.
So there's a portion of that which is from the dividend, but the lion's share is clearly the underlying business that is performing very well, particularly in cash flow terms as you can see there. I mean, the thing I would also highlight is that if you look at the EBITDA cash conversion just in the first half of the year, in the first six months of the year, that improved significantly. That was 83% just in a six-month period. If you exclude Latin Asia, that's a 100% figure in what is obviously, you know, seasonally a weak first quarter normally for cash flow.
On factoring, there's a year to date increase of about EUR 150 million, of which about EUR 50 million is FX. There's about EUR 100 million. There's some variations with sales. Our expectation is that it will be more or less stable with sort of variations on a quarterly basis. Yeah, more or less stable, I think, going forward. Yeah, the Chilean arbitration outcome has had no cash flow impact in the first half 2022. Okay. Very good. Thank you.
The next question is from Tobias Woerner from Stifel Nicolaus Europe Limited. Please go ahead, sir.
Yes, hello. Thank you for taking my questions. Number one is just with regard to the one-offs you had over the last couple of years, and seeing how you feel your bigger projects, especially in APAC, are now or what sort of shape they are, whether there are any risks to these projects currently ongoing, and whether the projects we know about.
Tobias, hi. It's Mike. You were asking about the one-offs in general and specifically how things are going at CIMIC. I mean, you know, overall, we have increased the proportion of low risk projects in our order book to over 80% compared with just over 60% about four or five years ago. A lot of that movement, possibly the majority I'd say, has been driven by CIMIC with more risk sharing, more alliance-style contracts, et cetera. Basically the risk profile has improved very significantly there. There are only three or four lump sum turnkey-type projects left in the CIMIC order book.
The CIMIC CEO a few months ago was highlighting the fact that even in the case of those four, they were, you know, on a sort of approaching completion type of track and that the risks associated with them were very well managed and the contracts had been more attractively agreed with clients, et cetera. I think that overall, we're in a good position. Yeah, we feel confident about the future.
The next question is from Christina Yang from GIC. Please go ahead.
Hello. Hi. Thank you for the presentation earlier. I just have a few questions. The first one is just following on one of the earlier questions on the inflation impact. I think you commented on Turner in the US. Can you maybe comment on, you know, the inflation impact on the projects that CIMIC has? What's the sort of percentage that you have currently is, I guess Alliance- style versus the other type of contracts? Could you also comment on any kind of progress in terms of order books in Leighton Asia? Because I know, I think, going back a few months, maybe, that has been a bit of drag on the performance.
The final question is on, you know, liability management on the bonds. You know, some of them are trading below par, you know, around par. Is there any plans for buybacks? Thank you.
Christina. Hi. Thanks for your questions. On sort of inflation, apart from sort of North America you were asking about, you know, for the remainder of the revenues, the 40%, which is not cost plus fee, because of Turner, we apply various tools for risk mitigation, as part of our risk management approach. This includes pre-purchasing of materials, pre-purchasing of subcontractor capacity, price escalation clauses which allow us to pass on higher raw material costs. In relation to wages, enterprise bargaining agreements with workers covering the whole duration of projects.
More immediately, in response to the more recent acceleration in inflation, the group's companies have responded with specific initiatives, which have included agreeing additional risk sharing mechanisms with clients, reducing the time during which the bid price, our bid pricing, is fixed, increasing bonding obligations for our subcontractors, and also negotiating potential additional price escalation clauses. I think that the CIMIC CEO back in February indicated that basically about two-thirds of the order book were Alliance- style or risk sharing type contracts. That would be the best figure we can provide you with. On Leighton Asia, as I think we mentioned, big improvement in EBITDA-to- cash conversion at CIMIC, which was 83% or 100% excluding Leighton Asia.
Specifically on Leighton Asia, we've seen an improvement in operating cash flow quarter on quarter. This is something that CIMIC said back when it published its Q1 results, and that continues to be the case. We expect a continued improvement during the rest of the year. Finally on liability management. I mean, you know, we obviously look at all our capital allocation options, and yeah, you know, we will look at all our options and if they make sense, if they create value whilst maintaining a strong balance sheet and our commitment to an investment grade balance sheet, then we'll be looking at all the potential options.
Miss Yang?
Thank you.
Ladies and gentlemen, as a reminder, if you wish to ask a question, you may press star followed by one on your telephone. The next question is from Filipe Leite from CaixaBank BPI. Please go ahead.
Hi. Hello, everyone. I have just one question regarding the contribution of holding and consolidation to your EBITDA. In this quarter, the negative contribution increased significantly. If we exclude the contribution from Abertis, the difference is even higher. My question is basically if you can explain the reason for this increase.
Hi, Filipe. Yeah, I mean, there are quite a few moving parts in there. They include also some transaction costs. We can get back to you with a little bit more detail. Basically, that's also a factor to bear in mind.
Okay, thank you.
You have a follow-up question from Marcin Wojtal. Please go ahead.
Yes, thank you. If I can just have one follow-up on the dividends from Thiess, if I may. You said it was about EUR 90 million, so maybe AUD 130 million to AUD 140 million. But if I remember correctly, the initial agreement between CIMIC and the co-investor in Thiess was that I think that their annual dividend would be AUD 180 million, so Australian. Can you maybe comment on that? Would you expect dividends from Thiess to increase in the coming years towards that 180? Thank you.
Hi, Marcin. No, the dividend received was AUD 89 million.
That was in Aussie dollars? Apologies.
Yeah.
I see. Would you expect that to grow in the coming years towards that level that was in the agreement?
Well, obviously, we think that, you know, Thiess is a very well-positioned business. It's got strong market position. The growth drivers of the industry are intact. There's a strong near-term pipeline of opportunities. It's true that year to date, the business has continued to be affected by negative weather conditions, quite considerable flooding. But as you may have seen, they continue to look at sort of other opportunities, like for example, the offer that was announced yesterday in Australia by Thiess for MACA.
Thank you so much.
The next question is from João Safara Silva from Banco Santander. Please go ahead.
Yes. Hi, and thank you for taking my question. Actually, it's linked to the previous question. I'm a bit lost here, and I also wanted to reinforce this. You're mentioning that the agreed dividend that I recall for CIMIC was AUD 180 million is now, this year, going to be only AUD 90 million. If you could please confirm this, or at least understand what if the agreement was revised or if there's flexibility on this agreement or basically if there's a higher share of the dividend to the other shareholder, and not to CIMIC. Then the second point would be on the acquisition you just mentioned.
Just wanted to understand what would be the financing for that acquisition, the MACA acquisition by Thiess, and if that also could jeopardize the dividend commitment. Thank you.
Hi, João. Yeah, so look, just to be clear, the dividend that we've referenced there is for 2021 from Thiess. It is true that there is a targeted 50/50 dividend policy totaling EUR 360 million per annum for the first six years. There's a catch-up mechanism for both Elliott and CIMIC, with Elliott having a preferential payment. Yeah, you know, we'll see how things develop going forward. Yeah, as I said, Thiess has got a strong market position. They announced basically a recommended off-market takeover offer yesterday to acquire 100% of the shares in MACA.
This is a cash offer. The board of MACA have unanimously recommended that MACA shareholders accept the offer in the absence of a superior proposal and subject to. You know, it is part of Thiess' strategy to diversify its operations across commodities, services, and geographies. Thiess has stated that they intend to maintain and grow MACA's strong brand and presence in the Western Australian market. MACA's located in Western Australia. Thiess is more in the east. It's a potential acquisition that makes sense to Thiess.
Just on the funding for the acquisition.
Well, it's an offer that's just been announced in the market. You know, we'll have to see how successful it is and obviously that will drive the funding.
Okay. Thank you.
There are no further questions at this time, and I hand back to Mike Pinkney for closing comments.
Okay. Thank you, operator. Thanks to everyone for listening in and for your questions. We'll of course get back to you after the call with any further details that you need. Thank you. Goodbye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.