Ellaktor SA

ATHEX:ELLAKTOR

Earnings Call Transcript 2022-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. I'm Poppy, your Chorus Call operator. Welcome, and thank you for joining the Ellaktor Group conference call and live webcast to present and discuss the Ellaktor Group 9 Months 2022 results. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Efthymios Bouloutas, CEO Ellaktor Group; Mr. Dimos Revelas, CFO Ellaktor S.A.; Ms. Aphrodite Avramea, Head of Strategy; and Mr. Andreas Papanagiotopoulos, Group Treasurer and Finance Manager. Mr. Revelas, you may now proceed.

[Dimosthenis Revelas, executive]

Thank you. Good afternoon, and welcome to Ellaktor's conference call regarding our 9 months 2022 results. A press release announcing Ellaktor's financial and operating results for the period, the interim consolidated condensed financial information and the presentation were issued last week. They are available on the Investors section of our website, www.ellaktor.com. On our call today, we will share with you the business update and review of our financial results, which will be followed by a Q&A session. I would now like to turn over the floor to Mr. Bouloutas.

[Efthymios Bouloutas, executive]

Thank you very much, Dimos. Good afternoon, ladies and gentlemen, thank you very much for your participation. As Mr. Revelas mentioned, I'm going to follow the presentation that has been uploaded last week in our website, 9 months 2022 financial results dated November 2022. Prior to getting into the numbers of the first 9 months of the year, I'd like to update you on the RES sales progress.

As you know by now, I'm pretty sure you know by now, we have entered in a strategic agreement with Motor Oil on the 6th of May, 2022, effectively doing a transaction whereby we are divesting 75% of our RES business. In terms of approval stages, on the 1st of October, Ellaktor BOD approval for the SPA and the shareholders' agreement with MORE was effected and commencing the RES segment spin-off RES is to be incorporating a new company. On the 4th of August, Motor Oil Board of Directors approved the SPA and the shareholders' agreement. On the 25th of August, the EGM of Ellaktor approved the transfer of the 75% of Ellaktor's RES sector to Motor Oil Renewable Energy. On the 8th of September, we had EGM approval by Motor Oil and the execution of the SPA, and on November 29, the Ellaktor EGM approved the spin-off of the RES sector.

We've also had the approval of the Antitrust Competition Authority in Greece. So effectively, all the regulatory hurdles, plus the milestones have been concluded, and we hope that we will be able to effect the financial closing transaction within the next 2 to 3 weeks maximum by the end of 2022. In terms of transaction structure and economics, I remind you that the RES sector was hive-down in a newly incorporated company wholly owned by Ellaktor called Anemos RES. The Motor Oil Renewal Energy and Ellaktor jointly formed a new company -- 25% - 75% -- in which company Motor Oil Renewable Energy will contribute in cash where Ellaktor has contributed in kind, and Ellaktor will sell and transfer the remaining of SpinCo shares for cash. So as detailed previously, all this will probably be finalized in the next couple of weeks.

In other developments, as what we've done since the end of last quarter on August 1, Ellaktor Value, a wholly owned subsidiary of Ellaktor, announced an offer to purchase all the outstanding Senior Secured Notes due 2024 at 101% plus accrued interest. The offer was triggered by a change of control due to framework agreement between Reggeborgh and Motor Oil. The offer was valid until September 21 and an amount close to EUR 500 million-- the exact number was EUR 497 million. So 74% approximately of total notional have been tendered.

So Ellaktor has funded the purchase by a combination of cash and facilities committed by domestic banks, and full redemption process is currently underway. We launched -- concurrently with the announcement of our 9-month results -- we launched a public tender offer for the remaining EUR 172 million, and this transaction is expected to be completed on the 15th of December. So by the 15th of December, we will effectively buy out the whole of Ellaktor Value PLC international bond of initial size EUR 670 million. Now with these corporate developments, I think we've completed the major part of our financial operating restructuring.

I'll turn now to page 7 of the presentation, where effectively the bullet points of our financial results are the following: sales have been increased with a growth rate of 16% to EUR 739 million versus the same period of last year, releasing an annualized level of last 12 months, more than EUR 1 billion. Our EBITDA increased by 67% to EUR 176 million, and on a comparable basis, it came in at EUR 185 million, up 41% versus the respective figure of the 9 months of '21. Our 9-month pre-tax profit came in at EUR 43 million versus losses of EUR 40 million during the similar period of last year, while the net income reached EUR 16 million versus losses of EUR 56 million in the respective period.

Now our net debt reached EUR 608 million from EUR 578 million, while the net debt from continuing operations amounted to EUR 720 million. Group cash and liquid assets amounted to EUR 434 million at the end of the quarter versus EUR 470 million at the end of 2021 and net debt versus annualized comparable EBITDA without taking into account the Moreas debt came in at a very healthy 2.6x. Finally, what I believe is very important, the operating cash flow for the company came in at EUR 40 million for the first 9 months compared to EUR 22 million during the same period of last year.

Turning to page 8, here you can see the 9 months and the quarter last 12 months comparison, this year versus last year of the revenue and the EBITDA figures for these sectors of the group. As you can see, the total increase in terms of revenue has been 16%, while the total increase in terms of EBITDA has been 67%. In terms of revenue, all of our sectors, construction, concession, environment, real estate and the discontinued operations/RES has performed higher than last year with high growth rates in construction of approximately 20%; in real estate, 39%; and the lowest growth in environment and discontinued operations of 5%.

Now in terms of stability, as you can see in the graphs in the same page on the left-hand side, you see that the EBITDA of the group has been remarkably stable during the last 5 quarters between EUR 55 million and EUR 67 million. Now in terms of operational update, I think we've covered that in our 6-month results. The difference versus the 6-month results is a total an additional EUR 48 million awards on the Construction segment for running year-to-date total of EUR 771 million, with a current backlog of EUR 2.7 billion, up 9% versus December 2021. The construction EBITDA for the 9 months continues to be on a breakeven basis, underpinning the sector's turnaround. Most of the other issues we've discussed in our previous results presentation. So in order to save some time, I will turn the conference to Mr. Dimos Revelas to give you a more detailed view of our results and our consolidated P&L and impact in our final numbers. Dimos?

[Dimosthenis Revelas, executive]

Thank you, Efthymios. On page 15, we present the group's P&L in a distinct way separately reporting continuing and discontinued operations. Looking at continuing operations on the left-hand side, revenues rose by 17% year-on-year, simply on account of construction and concessions, which recorded deltas of EUR 63 million and EUR 31 million, respectively. In terms of geographical breakdown, Greece accounted for 77% of continuing operation sales and other European countries for 18%, with the remainder being accounted for by Middle East.

Of domestic sales, 36% corresponds to the public sector. Continuing operations EBITDA settled at EUR 73 million or 8x last year's respective reading, thus yielding an EBITDA margin of 17.2%, excluding one-off charges, i.e., last year's EUR 26 million arbitration charge relating to construction, and this year's EUR 9 million charge relating to traffic disruptions in Attiki Ring Road in January. Comparable EBITDA would have been EUR 82 million compared to EUR 35 million in the same period of 2021. In the bottom line, continuing operations produced a pre-tax profit of EUR 4 million, reversing losses of EUR 40 million a year ago, while at the post-tax level, a loss of EUR 17 million was recorded, mostly attributable to income tax linked with the concession segment.

On page 18, in compliance with IFRS 5, the RES segment assets and liabilities are being accounted for in a single line as assets and liabilities classified as held for sale. However, the group view, i.e., including the RES segment, is also provided for comparative reasons on the next slide. Total equity attributable to shareholders amounted to EUR 321 million, with a ratio over total assets standing at 11.3% compared to 10.1% at the end of last year. The EUR 119 million delta in total receivables is mostly accounted for by trade receivables and contract assets, but they are also counterbalanced by circa EUR 54 million increase in trade and other payables mainly due to advanced payments received.

Moving on to page 20, as of September 30, the net debt of the group's continued operations, but excluding the Moreas nonrecourse debt, amounted to EUR 412 million, up by EUR 32 million for the first 9-month period, driven by circa EUR 4 million more debt and almost EUR 29 million less cash and equivalent balances. On the next page, page 21, operating cash inflows from continuing operations at - EUR 3.8 million compared to outflows of EUR 44 million a year ago, chiefly on account of the Construction segment's turnaround.

Moving on now to the business units, and starting with construction on pages 23, 24-- Construction's Q3 operating profitability is at breakeven, reinforcing the positive trend of the year with 9-month revenues expanding by 20% year-on-year. In total, new projects were EUR 723 million were awarded during the period with additional EUR 48 million signed after September 30, 2022. The most significant ones are the North Crete road section Neapoli-Agios Nikolaos of a value for Aktor EUR 140 million. All the values are referring to values excluding VAT and the share corresponding to Aktor. The Patra-Pyrgos national road, EUR 105 million; the Psyttalia wastewater treatment plant operation and maintenance, EUR 68 million; and the Corinth Canal restoration works, EUR 25 million.

Regarding concessions on page 25 and 26, traffic on all the roads we operate was up by 18.5% during the first 9-month period of 2022 versus the same period of last year. For Attiki Odos in particular, 9-month traffic was higher by 17% year-on-year, though marginally lower by 0.3% versus the 2019 reading. However, traffic is steadily catching up with the pre-pandemic levels. On June 7, a joint venture in which Aktor Concessions participates has been announced preferred investor in the PPP project of the Northern Crete road with a 20% participation. Both revenues and EBITDA posted solid growth rates for the period, up by 19% and 11% on a comparable level.

For the environment segment on pages 27 and 28, during the third quarter of 2022, a contract was signed the joint venture scheme between Ellaktor and other parties, Ellaktor's participation at 60%. This project was related to the Attica clinical waste incinerator, a concession tender for the revamping and 25-year operation of the facility. The budget of the contract is at EUR 86 million, and this corresponds to present value of the projected revenues over the project life.

Total revenues for the segment are reported up by 5% at EUR 88 million, and EBITDA reduced by 27% to EUR 11 million. Both items have been negatively impacted by a provision for a retrospective adjustment regarding increased RES revenue compensated at Day Ahead Market prices with an impact of EUR 9.1 million in revenues and EUR 7.9 million in EBITDA, respectively. Prospects remain solid for the segment as Greece needs to accelerate relevant infrastructure in compliance with national and EU waste management legislation and guidelines.

On real estate, no developments during the last quarter. However, Smart Park, the sector's yielding asset, is experiencing constantly rising footfall and excellent occupancy rates, both of which are reflected in almost 40% higher EBITDA versus 9 months 2021.

Finally, a very quick view on the RES segment on page 32. Both the financial and operating performance of the parks improved significantly with revenues and EBITDA at +5% and +6%, respectively, and the capacity factor at 25%. In the appendix, we have also provided with P&L details by segment for the period as well as segmental breakdown of the group's net debt.

I would now like to open the floor for any questions you might have. Thank you.

[Operator]

[Operator Instructions] Ladies and gentlemen, there are no questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

[Dimosthenis Revelas, executive]

Thank you. No other comments on our end. We remain at your disposal for any questions or information you might require from us. Thank you very much. Thank you for your attendance.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.