Ferrovial SE
AEX:FER
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
31.075
41
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Ferrovial SE
You don't have any saved screeners yet
Good afternoon, everybody, and welcome to Ferrovial's conference call to discuss the financial results for the first quarter of 2021. Just as a reminder, both the results report and the presentation will have been sent to you via e-mail and will be available shortly on our website. As in previous results, we would like to highlight the financial information included in our report has been impacted by the COVID-19 outbreak, mainly since the second half of March 2020. Given the uncertainty regarding the speed and the extent of resumption in activity, it is not possible to predict how the health crisis will affect Ferrovial group's information and performance in 2021. Ferrovial will continue to closely monitor trading conditions and further evidence of wider economic impacts. I am joined here today by Ernesto Lopez Mozo, our CFO; and the CFOs of our business units. [Operator Instructions] With this, I will hand over to Mr. Lopez Mozo. Ernesto, the floor is yours.
Thank you, Begoña, and hi to everybody. Thanks for joining this call. If we move to the first slide, the main highlights of this first quarter, really, toll roads show how vaccination advances can help the recovery of the economy and also to recover mobility. Full business reopening in Texas happened at the end of March, given the fast vaccination. And we'll see in the slides ahead that NTE and NTE 35W are already above 2019 levels, and of course, higher in revenues. Regarding the 407 ETR, still impacted by severe restrictions, I mean restrictions that could be similar to the ones we saw in April 2020. It's good to confirm no Schedule 22 payments in 2020. Also, we'll provide more color of the general understanding of the clause after discussions with the MTO. Airports, we have a resilient financial position despite all the challenges, but Heathrow has been able to raise, in the capital markets, GBP 1.3 billion additional funding, has good position and liquidity position, the same as AGS. The CAA has produced the reaction to our petition -- I mean the Heathrow petition for a RAB adjustment. They provided a small adjustment and they will address all the conditions of regulation in the end of the year for the H7 regulatory settlement. Regarding contracting, we have seen solid performance in Construction and Services. In Construction, Budimex keeps improving with 4.6% EBIT, just considering the operations without the real estate business that is being sold, as you are all aware. As I said, Services also with a solid operating performance. And of course, the end of the quarter, we hold a net cash position ex infrastructure projects of around EUR 1.9 billion. And we have total liquidity of more than EUR 7.5 billion. Okay. So if we move on to review the businesses starting with toll roads, we see the revenues impacted by lower traffic due to COVID-19. Really the start of the year had more restrictions and cases and also we saw severe winter storms in February in Texas. That has been partially offset by higher toll rates. And we'll see in the following slides that if we take out the effect of the winter storms, really, the impact in revenues and EBITDA would have been much smaller, almost, I would say, no impact vis-a-vis last year. There's a strong presence in the U.S. that we have and the highest profitability from the U.S. assets is here, 76% of toll revenues and 93% of toll roads' EBITDA comes from the U.S. And the U.S. is probably accelerating ahead of our expectations of GDP recovery. Just a reminder of projects that we are developing that will be material in coming years, well, NTE 35W Segment 3C. I mean this one, it's around 6.7 miles. It should open at the end of 2023, and it's advancing at good pace. As I said, this is a continuation in profile to the NTE 35W 3A, 3B, so very good prospects for this asset. In terms of the I-66 in Virginia, this is also advancing on schedule and should be ready for the completion in -- at the end of 2022, beginning of 2023. We are clearly accelerating investment here. In the quarter, we saw also good investment here, EUR 62 million. We still have above EUR 500 million pending of investment in this important asset. Other ones that are being developed are mentioned here in Colombia, Slovakia and Australia. I would also like to mention and probably we will be updating this information as we go on, that an important component of the good performance of revenues in the managed lanes in the U.S. and also really, the 407 in Canada, we have more than 30%, 3-0, in commercial revenues. Commercial revenues is mostly trucks, but also accounts that are paid for by companies rather than individual consumers. Okay. So we move on to review the managed lanes, probably the most important data on this slide are in the banner at the bottom. And here, we see a range of vaccination percentage in the different counties where we, where our toll roads operate, right? And it's between 45% and almost 60% of 1 dose of vaccination in population over 16 years of age. This is data of April 29. Also, I mean this performance that we'll see, and here we are talking about a graph where you can basically tell that NTE 35W and NTE are above or at the pre-COVID level -- I mean the 2019 levels. This is happening even with around 25% work-from-home index. Of course, these indexes are numbers that you have different calculations from different sources. This is from the University of Maryland COVID database, but we think it's quite telling that we get this kind of performance and performance in revenues with this level of work from home. One of the things that we've done, given it's kind of tricky to analyze how these mobility patterns would work, is do polls with users of the managed lanes and the corridors in Dallas-Fort Worth and what is the expected use in terms of -- or the expected trips compared to the pre-COVID levels. The answers that we're getting is that they will have usage very close to what the pre-COVID usage was, right, so 95%, 97%. Here, we are not talking about online commerce. It's just most of our individual users. Okay. So could see the performance of this graph, probably more telling are graphs we see on the next slide, where we have more detailed quarterly traffic and also the initial stages of April. So clearly, you see, I mean the trough in the 3 toll roads of the winter storms where basically traffic was halted due to the dramatic storms. And you see, on the other hand, that once that has been put behind, you have a reopening of the economy, a performance that is clearly above 2019 in 35W. It's already above in NTE, just 1 percentage just there. And LBJ is also improving. I mean probably when we look at LBJ lagging, it's also important to bear in mind that the capacity of the free lanes is higher in this corridor in LBJ than the rest. So congestion is, let's say, will appear later in time compared to the other ones. So let's move on to the next slide, where we see other, some interesting data. And here, we have the impact from restrictions, really. If we look at the right-hand side of the slide, we see that the -- until March 10, there were restrictions, right? But heavy vehicles showed a lot of resilience even with those restrictions. Very good to see that in March 2021, NTE had more mandatory mode events. That means when there's such congestion that we need to operate automatically above the cap. And there were more events in March '21 than in February 2020 pre-COVID, right? So probably the PM peaks are very close to pre-COVID levels. The morning still, you still have, as we said, some work from home, not everybody back in the office, still schools not full reopening in person. So all these things are affecting the morning peak. But clearly, the evening is already there. As I mentioned before, the impact in February of the winter storm was quite severe. All 3 concessions were closed since February 13 and then they reopened 8 days later. I mean if we -- I mean this was so impactful, really, that if we look at the banner in yellow, if we exclude the winter storm impact, revenues would have been plus 7% for NTE. That's quite relevant given that it was down almost 2% including the winter storm. In the LBJ, it was down only 16% compared to 26%. And in the NTE 35W, growth would have been 23%. And also helping here, of course, is the performance of the average revenue per transaction. That is impacted by a higher proportion of heavy vehicles, I mean the toll multiplier is between 2x to 5x, and also higher toll rates. So the region really keeps being a magnet for growth, and you see that the population keeps growing there. Texas is the third fastest state in terms of population growth from 2010-2020. And you have people still moving to Texas. It's an attractive area for business, and business and people are moving there. Dallas-Fort Worth is projected to be the #1 industrial real estate market in the U.S. this year, and this is according to CommercialEdge. You have 28 million square feet of new industrial space expected to be delivered in 2021, and that's 8% of all industrial space projected nationwide. So businesses are also relocating headquarters to Dallas-Fort Worth. You have several names, CBRE, Charles Schwab, you have a variety too of them. So we are glad to see, really, this region reopening, the reaction to polls from our customers. And I mean the winter is over, we are looking to a rebound in GDP growth and action in the region. Okay. So if we move to the next slide. We also mentioned on the I-77, still small compared to the rest, also lagging a little bit, but in the right direction. And we can see that Charlotte has remained in Phase 3 since early October 2020. There has been some additional easing of restrictions late in the quarter, that is March 26. And then now, I mean at the end of the quarter, business can now open at 100% capacity, restaurants and fitness centers can open at 75% capacity and bars and entertainment venues can open at 50% capacity with certain safety guidance rules to be followed. And well, Charlotte's largest school district has expanded the number of students in the classroom, okay. So a lot of reopening in the very last part of the quarter, also the effort in vaccination. Now you have 38% of the population of Charlotte that has received at least 1 dose as of 29th of April, right? And well, you see the growth in traffic also accelerating in the last part of the quarter. From February to March, traffic grew by 33.6%, okay. So the decline in traffic compared to 2020 has been kind of offset partially with higher toll rates and a better traffic mix. The important thing is to see restrictions and -- being removed and vaccination going up, that we see as key for all the mobility boost. Okay. So if we move to the following slide, we now get into the 407. And here, again, I will concentrate in the banner at the bottom. We have different estimates from the government of Canada, and they want to be able to vaccinate 64% of the total population in Canada by the second quarter of 2021. I mean, well, that's the intention. I mean the pace will also be affected by people's willingness to vaccinate. And you have that at the 29th of April, we already have 40% of the population of Toronto having received at least 1 dose. Please bear in mind when you see this graph that again, this is a graph that compares traffic vis-a-vis 2019 pre-pandemic, that really, when we look at February, March in Toronto this year, mobility restrictions were pretty similar to the ones in April last year, 2020. And now you have a 44% drop compared to an 80% drop last year, right? So things are reopening on. And other of the needs that we see, where people trying to extrapolate traffic in the alternative routes, the 401 and others, from different sources, they get to very different numbers. I mean we've used consultants to check on the different data points that could derive how the traffic is performing in the 401, and it's performing better from the first one, but it's still far from the 2019 levels. So probably a drop close or around 30%, 3-0, compared to 2019. As I said, I mean we've used consultants to check different data points. Okay. So we move to the next slide. We can see in more detail the performance in the quarter. And we see, as I was mentioning, that even with similar restrictions to March last year and as I said before, even similar to the ones in April, you have a better performance. But still, Toronto has to gain momentum as it's happening in the U.S. Let's hope that the vaccination speeds up and everything reopens more. Okay. So let's move to the following one, where we get into more detail on different other aspects of the 407, right? So probably starting with the bottom right-hand corner with Schedule 22. I mean the 407 ETR and the Ministry of Transportation reached an agreement regarding the interpretation and the application of the COVID-19 pandemic related to Schedule 22. Both parties have agreed that the Concession & Ground Lease Agreement considers a pandemic a force majeure event, and the COVID-19 pandemic fits in that definition. The parties also agreed that the reduction in traffic and inability to meet the traffic thresholds defined in the Schedule 22 is caused by that event of force majeure. And therefore, the concessioner is not subject to congestion payments until the end of the force majeure event. And the parties agreed that the force majeure includes 2020 and any subsequent year until the traffic volumes in 407 ETR and main interchanges reach pre-pandemic levels. By this, the pre-pandemic levels are defined as average from 2017 through 2019, or another condition or until there is an increase in toll rates or user charges for any segment of the 407 ETR. Okay. So if we look into the financial position, I mean cash and cash equivalents stood at close to CAD 600 million. And really, there's expectation to maintain sufficient liquidity to satisfy all the financial obligations, 2021. There is no meaningful bond maturities until 2022. And in 2022 (sic) [ 2021 ], it's CAD 18 million of maturities. 2022 is CAD 318 million, but again in 2023, it's only CAD 20 million. So it's a comfortable maturity profile. In terms of dividends, I mean no dividends have been paid to shareholders in the first quarter. That's all you all know -- something you all know. And last year, the 407 distributed CAD 312.5 million at 100% in that first quarter. The 407 ETR Board will monitor the pandemic and review a potential dividend distribution in 2021. So we'll have to see how the asset reopens, looking for vaccinations to ramp up. Toll rates, there's been no change since the increase in February 2020. And reviewing the financial performance, this is old news. You saw that more than a week ago, and these revenues were impacted by the lower traffic. You have revenues down by 41.2% and EBITDA down by 45.2%. The average revenue per trip increased 5% in this quarter. Please bear in mind that it compares to also last -- first quarter of 2020, where there was a rate increase in February 2020, so January compares with a lower rate. Okay. So let's move on to airports, where we have Heathrow and also results published last week. And you saw how Heathrow has worked in response to COVID-19 in the right-hand side of the slide, with a lot of cost mitigation and revenue protection initiatives. And that shows in the number below, that is a reduction in OpEx of 33.5% versus the first quarter of 2020. So there's been organizational changes. I think the theme of Heathrow is to also set a base for a more, let's say, for a leaner and dynamic, let's say, structure for the future. It's digitizing and is doing many different things, right? For the current operations, there's been consolidation of terminals. There's 2 terminals and 1 runway, renegotiation of suppliers' contracts and utilization of furlough scheme. There was no benefit from business rates. I mean here, the -- there was not that possibility compared to other airports in the country. In terms of CapEx also, it remains constrained to safety and resilience. So there's a 77% reduction in CapEx versus the first quarter of 2020. Very important to keep this strong liquidity position. I mean GBP 4.5 billion if you take into account the issuances in April before the results released by Heathrow, that will be GBP 4.5 billion, even if we don't consider that at the end of March, it was GBP 4 billion. So very solid liquidity and in reducing cash burn, while we await restrictions of -- in travel to be lifted. So there's been some news of reopening. It's gradual. We hope for more reopening and more vaccination to really boost travel. As we said, this liquidity position enables for 15 months under no revenue scenario, something we see quite unlikely -- or into 2024 under the different traffic scenarios. And S&P and Fitch have affirmed the credit ratings as investment grade, okay. So that's good news. As I mentioned in traffic, if we look into the left-hand side of the slide, we see, I mean the 1.7 million passengers quite reduced almost 89% versus the same quarter last year. But please focus on the Global Travel Taskforce, it's very relevant. The risk-based approach is important. Red, amber and green countries, the more green countries the better. Amber will be able to travel. So I mean this is the key in terms of reopening. It will depend, of course, on the situation in different countries and the levels of vaccination. Key information is still required, right? So it's not that easy. I mean you need different types of tests. There's cost and then the process to fulfill. International travel is expected to resume on the 17th of May at the earliest. And very critical, and Heathrow has been very vocal about this, is to have border force resilience to support the recovery and -- I mean the increase in passenger numbers. I mean it's taking too long for passengers, and this should get better. Okay. So if we move to the next slide, we touch on regulation. There was a reopener statement on the 27th of April. The CAA accepted the need for immediate action in order to meet its duties to consumers and to Heathrow's financeability, confirming an immediate GBP 300 million RAB adjustment. And indeed, this adjustment really falls short. I mean it's needed to immediately restore regulatory depreciation in line with regulatory principles. And this is really needed to keep all the confidence on investment in regulated assets that are regulated because it's key to deliver on the key infrastructure, and you need to deliver these investments with a level of certainty. The CAA will need to address all the issues related to adjustment fully in H7, so this will be in the second part of the year, to attract the investment needed to maintain services, keep prices lower and protect resilience through the recovery. The H7 framework also needs to rebalance risk and return. Heathrow's revised business plan was submitted in December 2020, and the CAA will publish the initial proposals in the summer this year. And the H7 period will start in 2022, January 2022. Okay. So also regarding outlook, I mentioned before about the reopening, the lifting of restrictions, that provides some certainty on the passenger forecast. And Heathrow has revised and provided a range of passengers from 36 million to 13 million. And here, the case is that there is a lot of pent-up demand, and they're really looking for international travel to restart. I mean one of the -- I don't know if it's the top query in Google in the U.K. now is "where can I go on vacation," right? So people are really looking forward to the opportunity to move internationally, right? So I mean the downside scenarios are related to restrictions being in place or more restrictions in the fall. And in the lower part of the range, there could be covenant breach at Heathrow Finance. In terms of interest coverage -- I mean in terms of interest leverage, levels are more comfortable, but there could be pressure in interest coverage ratios. Heathrow will update more in the June 2021 Investor Report, and also there will be more news of how the lifting of restrictions is working. Okay. Regarding expansion, it's a topic that it's in the back burner, but it's top priority as well. You have Heathrow remains committed to a long-term sustainable expansion. There was positive outcome last year. This is old news, but it's good to remember, the Supreme Court unanimously ruled that the ANPS was lawful and legal government policy. And Heathrow will be consulting investors, government, airline customers and regulators for the next steps. And last but not least, and I think Heathrow is leading here, is leading in sustainable aviation. I mean the Jet Zero Council is an opportunity to accelerate the U.K. aviation net zero plans. There's 2 major work streams, sustainable aviation fuel and zero emissions aircraft. Also, Heathrow 2.0 is aligned with the United Nations Sustainable Development Goals. So Heathrow is clearly taking a leading role in this in the U.K. and internationally. Okay. So we move on -- just closing on airports, we have AGS. Of course, it's suffering from restrictions as well. It has a good and strong liquidity position. As we mentioned, both shareholders committed GBP 50 million, so it's GBP 25 million each, to be injected to support liquidity and then the position now is with GBP 47 million of cash and equivalents. So in Ferrovial accounts, you will see the impact of the GBP 25 million, roughly almost EUR 29 million of investment in that airport. I mean this airport is expected to recover with the lifting of restrictions. In the meantime, there's ongoing dialogues to extend the current financial maturity of 2022 and try to extend it for at least 2, 3 years -- for at least 3 years. Okay. So this is kind of the plans that are being discussed. As I said, also another airport with pent-up demand is Glasgow. Others are having more activity like Aberdeen related to oil and gas and Southampton was impacted by Flybe's collapse in the past. Okay. So again, a lot of management actions. This is very important. All the efforts on cost reduction, I won't dwell into this. Also, CapEx is limited to safety priorities and compliance, but it is a 27% cut versus last quarter -- first quarter in 2020. Okay. So let's move on to Construction. Construction had a solid performance, improving last year's first quarter. Of course, Budimex keeps really leading the pack with a 4.6% EBIT margin in the first quarter. And also, a reminder that the real estate activity is held for sale, it's advancing for a close this quarter. And Budimex is communicating to the stock market on quite a lively basis, developments here, okay? So we should hear of the closing in this quarter, as I mentioned. That's the expectation. Okay. In terms of revenues and EBIT margin, just comment that there was no material impact in production, really, in revenues from COVID-19 in the first quarter. There has been good activity. Contracting, the order book has performed well. And we have more, let's say, pending backlog, right, because you know that we won a big contract in San Antonio, Texas. It's not part of the order book. So usually, we have something like EUR 1 billion of pending -- contracts pending to be incorporated in the backlog. Right now, it's almost double that. I mean it's EUR 1.9 billion. And this is thanks in part to that project and other contracting in Poland, mainly. Okay. So other events, apart from that sale of Budimex that I mentioned, you have the numbers there, quite a substantial deal, we also have others that have been signed that are pending authorization from the relevant bodies, right? So you have Figueras and URBICSA that are more than EUR 56 million, EUR 57 million that are pending approval by the regional government. Again, I mean we cannot talk on timing from them, but a natural thing would be to get them in the second, third quarter, should be getting the approvals more closer to the second than the third. And then another sale was the Nalanda sale agreement, not that big, but it's still EUR 17 million our share. And also that's pending competitions authorities' approval. Okay. So no change in the outlook at this point in time. Remember that we still expect to advance at good pace in the big works in the U.S. that will consume cash there. Of course, we have all these divestments that should bring cash to the division, but in the U.S. we...[Audio Gap]Of the...[Audio Gap]So we move on to Services. Services in the first quarter of 2021, we saw overall profitability improvement. Okay. It seems that the sound is not that great. I'm going to try and speak a little bit slower. If not, I will try and reconnect again. Hold on a second, I'm trying to improve the sound physically. Okay. So it seems there was a lot of background noise. I don't know if that's better. It seems it's better.Okay. So I'm moving on. Hopefully, it will be audible. I will try and speak a little bit more slowly. Okay. So in Services, as I said, we have good improvement in sales and EBITDA in Spain and Amey. Spain is in the back of both activities, environmental, waste treatment and collection and in infrastructure maintenance. And Amey is also having a good performance vis-a-vis last year, thanks to higher volumes in social infra and transport. And again, here, there has been no material impact in production from COVID-19. Okay. So in terms of the sales process, it's advancing well. Of course, the first milestones, you know, it's quite old now, the sale of Broadspectrum. The waste treatment and collection is advancing very well in Spain. We expect signing and closing this year. I cannot comment any further, but it's advancing at very good pace and with a lot of detail. In terms of the waste treatment activity in the U.K., this part, we have reclassified as continuing activity, although we will continue with its divestment process in the future. But I mean we think it can take more than 12 months. The reason for this decision is that we have really 4 plants here. One of them is reaching construction end and others are increasing availability in the following months. I mean this is like initial years of some of these projects, right? So it pays to have some of our good management from waste treatment working here. It preserves value. Could we accelerate and maybe do it before the more than 12 months that we're saying? Yes, we could, but we prefer to be prudent here, and therefore, we keep it. I mean it has no impact, really, in EBITDA in the numbers this year. So it's kind of, I mean net zero or close to, I mean, something like EUR 1 million in the accounts. So no material, but it's important to basically develop these plants before they go to the market. And of course, we remain committed to the divestment of Services division. The other parts are also advancing. All the processes are moving with preparation of staff and interested parties and different discussions. As I said, the one that is more advanced is waste treatment in Spain. Okay. So let's move from Services into the consolidated P&L. Okay. So we have at the consolidated level an improvement in EBITDA. I mean on top of the different things I've discussed at the operating level, remember that we took up a provision last year for a restructuring, a streamlining of overheads and also part of the preparation for more digitization of the support functions. So that's already over. That compares well. Then in terms of financial results, it would have been very similar, but we have an increase that is of 20-something, close to EUR 30 million from -- in Autema mark-to-market impact. Remember 2 things: I mean first is Autema was reclassified from a financial asset to an intangible asset last year when we lost the case to the Supreme Court, and that means that part of the derivatives are inefficient. So we should expect volatility in the P&L from that. It's not a cash element. It's not on the ex-infrastructure project perimeter. It's just infrastructure project without any cash outflow, but expect volatility there. It's important also to mention that there's probably not that much value in the equity for us, but there's a consolidated book value of minus EUR 117 million. So were we to divest this asset, we would have an immediate positive impact in P&L of that amount. So I would extract this part from, let's say, the recurring performance of the company, given what I mentioned.Then in terms of equity accounted results, we have the 407 ETR at Heathrow that I mentioned, no main extraordinary things there. When traffic recovers, we should see a rebound. And then in AGS, we have 0 impact. Basically, our equity accounting value at the moment is 0. And therefore, since it's equity consolidated, you don't consolidate any impact that could be negative there. Okay. And then in terms of discontinued operations, we have a positive impact of EUR 11 million from Ferrovial Services Spain. And that is basically the results that have been achieved, given the headroom in valuation have been recorded. And then we have the real estate activity from Budimex that is currently held for sale and also impacted in EUR 5 million. Okay. So that would be a quick review of the whole P&L, and we should move into the final part of the presentation. That would be the cash and the concluding remarks. I just hope that the sound is better. Okay. So in terms of net cash position, not much movement. The working capital impact this quarter was less than other first quarters, other years, so quite contained. And this is probably helped by the Services division, better payment profile, thanks to the U.K. measures. And also, in terms of help the cash position is the Budimex real estate activity that is part of these numbers. So the other remark I would like to make is that investments have been higher than other first quarters, recent ones, and we have in the EUR 129 million, the main numbers are investment on the I-66, investment in AGS, that is the GBP 25 million, EUR 29 million and a EUR 9 million investment in electricity transmission. So those are the 3 concepts that basically build up all the investment there. Okay. So we can move on to the concluding remarks I want to leave you with. And here, the first one is probably the boost we are seeing in GDP rebound, especially in Texas in the U.S. This should help to drive traffic and revenues and overall activity. In airports, remind everybody the pent-up demand and the -- how we are awaiting the wider reopening. Let's see how the summer pans out. Then in Spain, the Services divestment is advancing well. I mentioned waste treatment especially. Everything is advancing. Then we also -- I mean the Board approved the first scrip dividend that was kind of set by the general shareholders' meeting for the Board to decide. And here, we have the amount. So end of May, beginning of June, should finalize this process. And then, very important, we are communicating what has been communicated to the stock market regulator, 2 new independent Board members that will add experience, knowledge, so more depth, more breadth, more independence, more diversity. So welcome to all these new brilliant Board members. I hope you can have a look at the information that has been posted in the CNMV. So thanks for bearing with me. Apologies for the noise that has not been -- the sound has not been that great. And let's move into the Q&A session.
So the first set of questions come from Alejandro Vigil from Bestinver. First question: Could you give us your thoughts on Highway 413 versus the current capacity in the 407, as well as on the proposal to subsidize trucks in the 407 ETR?
Thanks, Begoña. Thanks, Alejandro, for your question. This is Pedro Losada, Cintra CFO. With respect to your first question on the proposal to subsidize trucks on the 407, we have no conversations whatsoever about this matter with the MTO, so nothing to comment on that matter. With respect to the Highway 413, remember that in full year, we gave some opinions from the company about this project. Over the last few months, there has been even more opposition from municipalities and regions on the project. The environmental assessment, the main change is that since this last Monday, the federal government will enter into play to also make an analysis and opinion about that analysis -- about the environmental assessment, sorry. So under our standpoint, that means that, number one, they can, after the analysis that will take some time, for sure, could maintain the scope, could change the scope or even could cancel the project. But this is based on our own information, that this based on public information. In any case, we assume this potentially will delay significantly the process because probably to make that assessment, the federal government will need to start from scratch. Thanks very much.
Thank you, Pedro. The next question also from Alejandro: Could you comment on the investment opportunities in connection with the economic recovery plans in Ferrovial's markets?
Well, thanks for the question. I mean this is quite an ample question. I mean in Europe, in Spain, you have about the next-gen funds. The next-gen funds are related to opportunities, a lot based on energy efficiency, renewables, other digital initiatives. So I mean there's going to be investment in urban, let's say, improvement for this sort of energy efficiency that I mentioned, that will be part of projects we can pull in. There's, of course, things in mobility related to 5G and this could be not only next gen here, but also could be things related to the U.S. and other areas, right? So you can have opportunities of development of products to optimize traffic, to also provide services to -- and safety to your drivers. There's different things here that are more related to software or to IT where we have capabilities and can be done. But all these things that are more related to the recent flavors, and we look into some things that we can do here, and it's not a small amount. But we see, in any case, a need for infrastructure in many countries, the U.S. being the main one. And here it's a mixture. There's some public things where we will compete. There's others that are being in what we call development phase and we can only comment when they come to the market. But we are talking about opportunities that in the next 4 years, they could be several billions of total equity, for instance, in the U.S. I'm not being more specific here, given some are in the development phase. Others will be for a bit. And I don't know if maybe later on in the conference, we can comment some of the public projects. But in general, some of them will be more probably when they are out of the development phase. So it's several billion in opportunities in these different markets. And of course, it's not only these possibilities. Also, we'll be looking at possibilities that could come up in airports that could be attractive, and in general, other infrastructure, right? So there's opportunities there. I'm not being more specific. We prefer to comment for it, on projects, when they become more public.
Thank you, Ernesto. The next set of questions come from Jacopo di Nardo from Latitude: Looking at congestion data around the world that is reopened, it seems like there is not a huge amount of difference versus 2019, apart from maybe a flatter curve of congestion around the day. How are you thinking about the overall tariffs once the states of emergency are lifted in your North American markets?
Thanks, Jacopo, for the question. This is Pedro Losada again. Well, as you mentioned, you're talking about once restrictions are lifted, and we're still in the middle of a lot of restrictions in many of our regions and that are impacting our assets. It's true that we have seen improvement as restrictions are easing a little bit, but it's too premature, probably not prudent to share with you our views, given we need to wait a little bit more to have more data points to take those decisions. Just to give you a little bit more color, perhaps we can say that we are seeing a small change in traffic patterns during the day, with less trips being done during the AM peaks and a full recovery in middays and PM peaks, driven by home-based, non-work-related trips and trucks. But again, it's -- we are monitoring how traffic profiles are evolving, and we will adjust the toll rates policy accordingly. Thank you.
Thank you, Pedro. The next question also from Jacopo: You sold the Budimex house builder in Poland for circa 2x tangible book value. What would you like to do with the proceeds? Will they be reinvested in Poland?
Thank you, Jacopo. I mean this is Iñaki Garcia, Ferrovial Construction CFO. I think part of the question has been already answered by Ernesto. I mean we reached a conditional agreement on March. It's still to be closed, but it's been communicated to the Securities and Exchange Commission that the deadline has been extended to the 14th of May. But it's very likely that we close this deal. And of course, I mean your numbers are right. The proceeds are going to be around EUR 330 million with a surplus before tax and minorities of EUR 150 million. Regarding what to do, I mean with the proceeds, I think it's very soon I mean to talk about this in this moment. I mean first, because it's not closed. And second, because whatever decision will be taken by the supervisory and shareholders meeting of Budimex. But of course, I mean we are analyzing all the opportunities, I mean considering what Ferrovial could do, a balance between dividends and potential investments in Poland. And of course, there are good opportunities in Poland that will be analyzed as we do always. Thank you.
Thank you, Iñaki. The last question from Jacopo: You've now a very high net cash position. Would you consider a buyback of larger dimensions to shrink the discount to your net asset value?
Thanks for the question. You're right. I mean we have a priority to invest, and many of you guys have pointed that out. I mean we have a net cash position. That is quite important is liquidity, and we need to invest to create value. We are working on industrial investments. That's the preference because we think that we are at a time where a lot of infrastructure will happen. I know that there has been a lot of comment that a big chunk could have been Maryland, but there's others coming. And we have a priority for that. Of course, if we cannot deliver that, maybe that could be entertained. I mean closing the discount to the net asset value is something that is very important. We think that the best way to do that is to invest wisely, but we don't rule out in case we don't consider it. So priority for the house is to invest profitably and then develop and clinch the opportunities that could be coming.
The next question comes from Nicolò Pessina from Mediobanca: Regarding the 407 ETR, what are your expectations in terms of traffic recovery?
Thanks, Nicolò. Again, based on the restrictions and that we are currently under shutdown on the stay-at-home order, it's too premature to try even to share our own views. We need to wait a little bit more once restrictions are lifted and also looking quite close to the vaccination evolution that is going nowadays better than a few weeks ago. It's speeding up, and that will give probably the opportunity to have more views in the coming months. But today it's too soon to answer that question.
Thank you, Pedro. Also from Nicolò: How are the nearby highways to the 407 performing?
Well, typically, we do not share this type of information. Sometimes this information is not public, and we are mindful of our obligations with the public authority that could share this type of info. What we can share is we work with technical services providers that gave us some views about how congested could be our corridors all around our assets. One of the companies, StreetLight, what we can share with you is that, that company end up with the conclusion that 401, particularly, but probably that could be extrapolated to the rest of the corridor, but 401, has a 30% down traffic performance with respect to 2019. That can give you a little bit of flavor and partially answer your question. Thank you.
Thank you, Pedro. Third question from Nicolò: Considering Ontario Ministry of Transport seems to be increasing the tariffs for Highway 407 in June, would you expect the 407 ETR to do the same at some point this year?
Thank you, Nicolò, again. Just to clarify, 407 ETR contract has nothing to do with 407 extension contracts. So despite the fact that probably there's a scheduled tariff increase for this next July in some of the extensions, again, that has nothing to do with the 407. Besides, as Ernesto has explained during the presentation and based on the agreement with the MTO and based on the fact that we are still under a force majeure event, it's not foreseeable that we can change at all the tariff during 2021. Thank you.
Thank you, Nicolò. Thank you, Pedro. The last question from Nicolò: With the current traffic outlook, would you expect NTE and LBJ to pay a dividend in 2021? And what could the dividend policy be going forward?
Thank you, Begoña. Well, we -- as we have mentioned in the presentation, after this quarter and the lifting of restrictions in the Dallas area, we feel more confident that the base -- that the performance is going to evolve much better during the rest of the year. As per the financing contract, we are allowed to pay dividends in June and December. So we need to wait till those months, comply with the covenants and ratios of the financing contracts, and then hopefully, if the Board decides, we will distribute dividends, yes. Thank you.
Thank you, Pedro. The next question comes from Filipe Leite from CaixaBank BPI: Why does the EBITDA from other activities stand at EUR 15 million in the first quarter of 2021 versus minus EUR 38 million in the first quarter of 2020?
Okay. Well, thanks for the question. Well, one main driver and a second one, more than any other thing, the first main driver is that in the first quarter, we took a provision to streamline overheads and digitize support functions. That affected the first quarter of 2020. In the first quarter of 2021, you have an impact that is quite sad for management, that we got much less shares and bonus, given the COVID-19 affecting the performance of the share and the results. And that was released, this part, this year. And then other minor parts are, as I mentioned before, waste treatment from the U.K.
Thank you, Ernesto. The next set of questions come from Elodie Rall from JPMorgan: You mentioned that no Schedule 22 will be due until there is an increase in toll rates or user charges for any segment of the 407. Can you clarify on what level of the increase in tariffs is this based on? Is it 2019 or 2020 level?
Thanks, Elodie. This is Pedro Losada. The tariffs are referring to the current ones. So we can -- we are restricted to change tariffs with respect to the current ones that we are handling in the concession. That would be once we have the impact.
Thank you, Pedro. The next question also from Elodie: You last said you expected 407 ETR to resume dividends by the end of 2021. Is this still the case? Or has the situation changed? Did the Schedule 22 outcome affect the way you look about dividends?
Thanks, Elodie, again. Starting with the last part of the question, I would say the other way around, the Schedule 22 changed the way we see dividends on the positive side. On the first part of the question, yes, we maintain that the idea is, again, based on how traffic evolves. And that means how the ratios in terms of financial restrictions and with the rating agencies evolve during the year. We are assuming that based on all of that, the Board could take a decision to backload it, as we said, on the full year results, the potential dividend distribution by the end of 2021.
Thank you, Pedro. The next set of questions come from Luis Prieto from Kepler Cheuvreux: After the initial decision from the Maryland DOT regarding the protest of the I-270 outcome, should we expect Cintra's consortium to further appeal against this decision?
Thank you, Luis, for the question. Unfortunately, we are still stuck on our NDA with the administration as we were back in February when we started to receive these questions. We have read the press, as you guys, but we are restricted by the confidentiality agreement, so we cannot make any comment whatsoever on this process. Thank you.
Thank you, Pedro. The next question also from Luis: Is there any update you can provide us with on the managed lanes pipeline in the U.S.? Are you seeing increased competition? Is there any change in your views on the country on account of the President's infrastructure plan proposal, particularly in light of the potential tax changes?
Thanks, Luis. Well, in -- with respect to the increasing competition and pipeline in the U.S., we are monitoring different alternatives. We have mentioned some of them in the last results presentation. We are looking for several opportunities in different states as Georgia, Florida, Texas, I mean some of them that were mentioned before. Some others are a little bit confidential, but still looking for managed lanes opportunities with high concessional value. As you know, that is one of the main goals of the company. With respect to the competition, as we have seen in the last process with here with -- we're involved in Maryland, we have not seen too much rise in terms of competitors. So we still see the usual suspects on this. With respect to your comment on tax. I think it's a little bit soon to see the scope of Biden's tax reform, although a potential tax hike could hit our tax position. Because we have a significant amount of tax credit, we do not expect a severe cash tax impact. But again, a little bit soon to analyze the scope of the tax reform. Thank you.
Thank you, Pedro. The next set of questions come from Marcin Wojtal from Bank of America: Considering the agreement reached on Schedule 22, is your intention to keep toll prices at the 407 unchanged until traffic volumes reach pre-pandemic levels? Or could you consider raising prices sooner than that?
Thank you, Marcin. Yes, again, sorry, I'm repeating myself too many times, that it's so soon to answer these type of questions. We need to see how things evolve, sorry. We definitely, we need to see whether -- when and how we are going to reach this pre-pandemic level, then to understand which is the trade-off to increase prices or to maintain them in -- for the sake of the interest of the concession. But again, it's too soon to answer these questions. Thanks.
Thank you, Pedro. The next question also from Marcin: Do you anticipate to present bids for new U.S. managed lanes projects before the end of 2021?
Thanks, Marcin. We are not -- we don't have a pipeline for managed lanes before the end of 2021. It's true that we are working on several initiatives that could create that pipeline in the coming 12 to 18 months. But no, the answer is no, we don't have any specific projects of managed lanes in this year.
Thank you, Pedro. The next question and last from Marcin: Do you expect Heathrow to require an equity injection over the next 12 months? And would Ferrovial be willing to participate?
Thank you, Begoña. Hello, Marcin. Heathrow has a healthy cash position of amounted GBP 4.5 billion. That cash is enough to meet our forecast needs for the next 15 months under the very extreme scenario of no revenues. On top of that, the balance sheet has got very strong because of the recent capital increase of GBP 600 million in the SP vehicle, and the reopening amounting to GBP 300 million. So strong liquidity, a strong balance sheet. Having said all that, there might be downside scenarios resulting into a potential breach of covenants at Heathrow Finance. We would see those breach of covenants as technical and temporary ones, so we don't expect to have an equity injection at the Heathrow level because of these reasons. Thank you, Marcin.
Thank you, Iñaki. The next question comes from Kenton Moorhead from DWS: What percentage of Spain's Services is waste business? Is this the entire business in Spain or just a portion of it?
Yes. Kenton, it's a portion, but it's a big one. I mean, it's between 70% and 80% of the value of the business in Spain.
Thank you, Ernesto. The next question or set of questions come from Patrick Creuset from Goldman Sachs: How is the light truck or e-commerce-related traffic currently trending on the managed lanes and the 407 as a percentage of pre-COVID levels?
Thank you, Patrick. As we have mentioned several times, the trend, it's better in terms of the performance in heavies versus pre-COVID, and most of them is boosted by the e-commerce. Thank you.
Thank you, Pedro. The last question from Patrick: The I-66 is now more than 60% complete. How do you see the chances of an early opening mid-next year as achieved with the Dallas managed lanes?
Thanks, Patrick. As of today, we are running according to schedule, so we cannot say that we -- that there's a real chance for early opening mid-next year. So we maintain by the end of 2022 as the goal for ending the construction.
Thank you, Pedro. The next question comes from José Manuel Arroyas from Santander: About the mechanics of the new Schedule 22 rules, you say the suspension of Schedule 22 lasts until there is an increase in toll rates for any segment. Just to confirm, if the ETR raises tolls in just 1 segment of the road, does this mean Schedule 22 is back in full application as per usual across all 24 segments of the 407 ETR?
Thanks, José Manuel. The answer is yes. If you increase the tariffs in just 1 segment, you pay for the S22 full amount.
Thank you very much. The next question comes from -- set of questions come from Nabil Ahmed from Barclays: Could you please provide an idea of Texas managed lanes pricing in the first quarter, excluding the mix, i.e., heavy vehicles?
Thank you, Nabil. Sorry, we do not provide a breakdown on this. We share the average and the 30% transaction, and that is a mix of the heavy vehicles impact in terms of the weight for that average calculation, but also on tariffs. And as we have mentioned in the presentation, those tariffs has went up in all of the 3 Texas managed lanes. Thank you.
Thank you, Pedro. The next question also from Nabil: How do the motorways traffic trend look like in April? Is there any improvement in the 407 ETR?
Thank you, Nabil. Well, the way we see April is pretty much in line with March, so it's good evolution. But keep in mind that April, we have seen higher level of mobility restrictions, but in line with March.
Thank you, Pedro. Next question also from Nabil: Has the LBJ started to recover? And did you see a continuation of the March trend for the NTE and for 35W?
Yes. Thank you, Nabil. Yes, we have seen in the presentation that the 3 Dallas tollways has performed much better during March with -- compared to 2020, and we keep on seeing the same type of evolution during April. So the answer to your question is yes. Thank you.
Thank you, Pedro. The next question also from Nabil: Could you please update on your savings plan at group level?
Thanks, Nabil, for the question. Well, you know that we aim for a EUR 50 million saving per annum. We are pretty close to that amount, close to EUR 40 million savings. The reason for not being getting 50 is -- part of it comes with digitization that needs implementation of systems and so on, right? So we aim -- are currently above EUR 30 million, approaching EUR 40 million and the EUR 50 million should be achieved once the implementations of the IT is finalized. And for that, we should be looking to 2022 in the second half.
Thank you. The next question also from Nabil: How much cash consumption would you expect for Construction in full year 2021?
Nabil, thank you for your question. This is Iñaki. Well, it's too soon, I mean, to give you any guidance on the cash consumption. But just to give you some color, I would say that there are 3 levers, I mean that will be playing. I mean the first one is the -- of course, we have this provision for losses in the U.S. No impact on the P&L, but of course, I mean, these losses should be paid. On the other hand, I mean you know that we are contracting and still we have high expectations of high contracting -- high awarding. So that will -- that could give some advance payments. I mean if all the contracts are awarded in time during the year, and the [ 13 ] -- the divestments that have already commenced that probably will be collected during this year. Thank you.
Thank you, Iñaki. The next question and last from Nabil: How much CapEx do you expect for the group in full year 2021?
Nabil, well, the main driver of CapEx here is investments in I-66 that are kind of accelerating from Cintra, that could get close to EUR 400 million. And then you've seen investment in AGS by airports and other investments in the group would be minor, but we could easily be in the high EUR 500 million, close to EUR 600 million for the year.
Thank you, Ernesto. The next set of questions come from Tobias Woerner from Stifel: Have you -- you have seen a significant improvement in the Services divisions. Can you explain a bit on why, please?
Well, there's different things going on, right? I mean in -- you've got Amey. Amey had more activity in social infrastructure, defense contracts and maintenance, and also more highway maintenance. This higher activity was reflected in higher EBITDA. In terms of Spain, also, you had an improvement in industrial waste and also in the waste from hospitals and so on. So waste treatment vis-a-vis last year was also a clear improvement. And also, some contracts that were more affected by the pandemic last year related to maintenance of -- well, mainly services to infra like the, let's say, the trip attendant in rail. In Spain, the Renfe contract also was performing better than last year, that had reduced activity given the pandemic. So overall, more activity also in the parts that could have a higher margin.
Thank you, Ernesto. The next question from Tobias: The AGS at equity result was significantly less bad than last year. Could you explain why?
Hello, Tobias. This is Ignacio Gastón from Ferrovial Airports. The reason is accounting, in particular, international accounting standard #28. Basically, the share of losses for AGS has exceeded the interest of Ferrovial into that company. Therefore, Ferrovial has discontinue recognizing further losses coming from AGS. Thank you, Tobias. Thank you, Begoña.
Thank you, Ignacio. The last question from Tobias: Are you starting to see more projects in Spain and Poland on the back of the EU's next-generation recovery plan?
Thank you. Iñaki again. I can tell you about Construction. It still is too soon, I mean, and we need more clarity on the plans. And we expect this clarity in the second half of the year. But what is true is that Ferrovial Construction has already presented expressions of interest, around 3.4 billion. Basically, green real estates and energy-related, no? I mean, urban rehabilitation, industrial real estate. So I mean there are projects. We expect, I mean, as mentioned, more clarity on these projects, but we expect some kind of pipeline. I mean that we have the capabilities, I mean, to get to those, no? Thank you.
Thank you, Iñaki. The last questions come from Nicolas Mora from Morgan Stanley: Looking at NTE and NTE 35W, most advanced in the recovery, westbound traffic on NTE gets premium pricing. When could eastbound traffic also jump on the bandwagon of dynamic pricing? What about the 35W?
Thank you, Nicolas. It's true that eastbound is performing better, but also westbound is getting closer to the -- to those same levels. Probably, we need to wait a little bit further, but we are positive that we will get there and that will apply not only for the NTE, also for the NTE 35W.
Thank you, Pedro. And then last question from Nicolas: What would you say is needed for LBJ traffic to return to 2019 performance? Dallas/Fort Worth International Airport further ramping up, the end of works on the eastern stretch, which are expected for late 2024, economic growth and lesser impact from working from home? Thank you.
Yes. Thank you, Nicolas. Probably, I would say that we'll -- more to do with people coming back to the office. Keep in mind that LBJ is an urban corridor with a higher percentage of commuters. So -- and we see out of the 3, that the -- probably you have less traffic even in the corridor, and that's why this is more impacted in terms of the traffic overall. But it's probably more related to commuters than the other things that you are mentioning. Thank you.
Thank you, Pedro. We have a last set of questions, which is just coming in. We'll be reading them shortly. The next set of questions come from Charles Maynadier from Kempen: Could we expect further divestments of some of your mature toll road assets in the short term?
Thanks. No, not really this year. But we expect this to finalize to close the pending ones and that are just pending authorization, but not at this point in time, no. Thanks.
The last question from Charles Maynadier: Given the changes to your initial estimates for the managed lanes, traffic mix, dividends, et cetera, and the inclusion of new assets, do you expect at some point after the pandemic to give visibility to the market through an updated or a simplified version of the toll roads valuation file you provided in 2019?
Thanks. Yes. I mean we should. I mean we really need to look at more information patterns, how things are. We have to make the decision just on how patterns, let's say, become more apparent and also our investment activity. The combination of those 2 things means that not in the short term, but it's something that is helpful for our investors, has been in the past and is something we should carefully look at. Now with all the activity ramping up and more investment, I don't think it's the time, but we keep looking at the right occasion to provide more information.
Thank you, Ernesto. There are no further questions.
Well, thank you all for attending the call, for being with us. I think that the news are encouraging. Hopefully, all the health situation will recover more quickly, all the vaccinations will work. Thank you. Bye-bye.