Ferrovial SA

MAD:FER

Earnings Call Transcript 2020-Q1

[Begoña Morenés;Manager-Investor Relations]

Good afternoon, everybody, and welcome to Ferrovial's webcast to discuss our first quarter 2020 financial results. We hope you and your families are all safe and well in these troubled times. Just as a reminder, both the results report and presentation are available to you in our website. Today's results are not a set of interim accounts as per IAS 34. We'd like to highlight that first quarter financial information included in our report has been impacted by the COVID-19 outbreak, mainly during the second half of March. However, at this stage, given the uncertainty about the speed and extent of the resumption in activity, it's not possible to predict how the health crisis will affect Ferrovial Group's 2020 financial statements, especially in relation to impairment tests of assets, fair value of discontinued activities or provisions for onerous contracts. Ferrovial will continue to monitor closely trading conditions and further evidence on wider economic impacts from COVID-19 pandemic, and will update the market on these impacts accordingly. [Operator Instructions] With this, I'll hand over to Mr. Ernesto López Mozo, Ferrovial's CFO, who will be leading this conference call. Ernesto, the floor is yours.

[Ernesto López Mozo, Chief Financial Officer]

Thank you, Begoña, and hello to everybody. Well, starting with the first slide, well, Page 3, actually, we have the overview of the quarter in this unprecedented global health crisis. The operating impact from COVID-19 has really been felt in the second half of March. And the main impact in Toll Roads and Airports and traffic. In Toll Roads the main impact has been on light traffic, and heavy traffic has fallen as well, but has shown more resilience. In Airports, the strong impact, as we said, happened in the second part of March in Heathrow and AGS. In Construction & Services, the impact has been limited somehow and restricted to Spain for the time being. We closed the quarter with a strong financial position. There's record high liquidity at Ferrovial, EUR 5.9 billion, including close to EUR 300 million of available lines ex-infrastructure projects. The net cash position, ex infra, is EUR 1.6 billion, pretty close to the position we had at year-end. There is a strong liquidity also in the main infrastructure assets. In terms of COVID-19, specifically, there has been many measures. I mean, the first one has been the health and safety of our employees and clients, that is a priority. Also, we have contributed to face the current pandemic, providing essential services like maintenance of hospitals, operating ambulances and also development applications to support potential positive cases, and also manufacturing with 3D printers, breathers and masks, for instance. Also, we created a fund -- The Ferrovial together COVID-19 fund to financially contribute to alleviate the impact of COVID-19. In terms of operational efficiencies, this has been a priority as well, reducing operating expenses and restructuring. At Heathrow and AGS, the streamlining of operations is very important, although the effects will be seen more in the remainder of the year than in the first quarter. Also, the announced Horizon 24 plan included a new operating model and the restructuring according to that plan has already started. So if we move to the following slide, we can have an overview of Toll Roads. And in the consolidated numbers, even though we had that impact in traffic, we posted, on a like-for-like basis, growth in revenues of close to 7%, the same as in reported EBITDA. This is due to the higher contribution from the U.S. Managed Lanes, and despite COVID-19 impacting traffic in all of them. Heavy traffic, though, has decreased at a lower rate, half or 2/3 the rate of decline of the light traffic. The U.S. now represents 68% of revenues and about 80% of EBITDA of the consolidated numbers. Also, we have the equity accounted results from the 407ETR that I will cover in more detail later. I think it's useful to look at the graph on this slide to see how the evolution has been along time (sic) [ over time ]. I mean, the first part that we have in all the roads, 407 through NTE 35 West is January or February. And here, we can see that the start of the year was very solid with important growth ahead of -- before COVID-19. Then we have the effect of March with a decline that basically is affected by the second half. Then we have the traffic of the week from the 28th of March through April 3, where we see very important drops in traffic from 76% in the 407 to 61% in 35 West. And what we see is that, with even some reopening of the economies, let's say, and we see a slightly better traffic already. So here, we have just an image of the April 25 to May 1, the yellow bars, where we can see that in Dallas-Fort Worth, we see some recovery of traffic. Of course, as I said, these are unprecedented times, the reopening of the economy has been limited, and we will keep an eye on these developments and update you accordingly at the quarterly results. Okay. So if we move on to the following slide, we can really have a look at the 407ETR. I mean, these results have been out for some days, so I won't spend much time here. You see that the decline in revenues, much lower, of course, than the decline in traffic, helped by tariffs. And we have also the EBITDA dropping a little bit more with some additional expenses in systems and doubtful accounts, but very limited, really, in absolute amount. When we look into the liquidity position, probably it's the best picture of how solid the asset is, right? I mean, you are not looking at the typical financial default ratios of any financing. You have dividend lockup ratios at 1.35x and the liquidity position of $1.5 billion is well above the debt service for the year, that is close to CAD 400 million. So very solid. And also when we look at the economy of the region, I think this is important, it's quite well diversified, right? So when we see a reopening, we should see the different sectors faring, probably in a different speed, but having a diversified economy is something that helps. In terms of dividends, you know from time ago that there was a dividend pay at the start of the year regarding the first quarter of 2020, and now, for the second quarter, or orders coming forward in the year, the Board of the 407 -- I mean, we'll monitor the situation, the current pandemic and how the economy and traffic is evolving. So here we will keep, as I said, a close monitoring of the conditions. If we move to the following slide, where we have the Managed Lanes, clearly, on the top left corner, we have the performance in terms of EBITDA, and we can see the important growth of 35 West. 35 West is clearly a corridor that involves heavy traffic and logistics traffic. And this part of all the distribution network on the Dallas-Fort Worth Metroplex, right? So you can see that performance, despite the fall in traffic in the second half of March. So heavy traffic has a higher share naturally with this better performance and the growth in share of revenues of the heavy traffic ranges from an increase of 20% to an increase of 40% along the different toll roads in this subset of 3 toll roads. In terms of liquidity position, again, this financing doesn't have the typical financial covenant for default ratios. You have dividend lockups at 1.2x. And the liquidity is also very high. I mean, with reserves having an excess more than 4x the debt service or needs for the year.Okay. So very solid position. And also, from an economic point of view, the diversification is a quite broader than what many people that don't know the region could imagine. And you can see in this picture, this image, that is very well spread, and mining and oil and gas extraction represents only 4% in an economy that is more diversified by the day. Also on the rest of the slide, we can see the tariff evolution in this first quarter. And also, I mean, the comment regarding dividends is that this will depend on the operational performance. This excess liquidity and the assets are very solid, but we cannot provide guidance now for the dividend for the year. If we move on to the following slide, where we have Heathrow. Heathrow was, well, published last week, on Friday. So this is probably no news to many of you, but it's worth highlighting also had a good start of the year, but then we had the drop in the second part of March. That meant that in the first quarter, traffic fell by 18.3% and really now traffic is extremely low. As you have seen from their presentations, a drop has been more than 90%. I mean you're having probably some cargo flights that are very important, that has increased dedicated cargo, very important for vital supply lines. And Heathrow is working on health and safety initiatives to reinitiate traffic and also protecting long-term value with airlines and retailers so that they can come back when operations reopen. In terms of financial performance, revenue dropped by close to 13% and EBITDA by 22.4%. Here, I would like to highlight some major one-offs that have been applied, really looking for efficiency, but had affected our bottom line results this quarter. First, there was a GBP 13 million provision for a transformation program, where, basically, with a redesign of organization, a shrinking of the workforce, that provision took place. And also, we had a write-off of capitalized costs, GBP 52 million. Basically, projects that won't be reinitiated. And some projects that were related with retail outlets and so on, that won't happen in the foreseeable future. Okay. So these provisions are for programs that will make Heathrow more efficient. As we can see in the bottom right corner of the slide, we have the Heathrow response to COVID-19, where operating costs are aimed for a reduction of at least 30% in 2020. But as I said before, these will be seen in the remainder of the year. In March, costs were only down 5.4%. So different initiatives are taking place like shrinking and redesigning of our organization, concentration of operations in a single runway and 2 terminals and well, executive pay have been canceled, recruitment frozen and all nonessential costs have been removed. Also CapEx has been addressed. And from a budget -- from the investor report of GBP 1.1 billion, it has come down to around GBP 500 million. Okay. So very important efforts from Heathrow. The most important figure to look at, given the drop in traffic now, is the liquidity that Heathrow has. So it has GBP 3.2 billion of cash and committed facilities that allow for, really, more than 12-month liquidity horizon. I mean, 12-month liquidity horizon is with no revenues and without all these additional cost initiatives that will help to go longer if needed. Also something that is very important that is not in the slide but was covered by Heathrow in their conference call this week, is that also at Heathrow Finance, the holdco -- holding company above Heathrow (SP). There's liquidity well in excess of the debt service, right? So with liquidity north of GBP 200 million at the end of March, now they are probably looking, as we speak, as -- to liquidity close to GBP 400 million in that part of the structure, where debt service is currently close to GBP 100 million annually. So liquidity has been very well-managed by Heathrow, and this provides comfort going forward. The dividends paid by Heathrow at the beginning of the year ahead of COVID-19 in full are pictured in this slide, and we have 25% of that we got. Okay. So we move to the next slide to cover AGS. AGS is a similar story, probably it started earlier with the collapse of Flybe. And also we had, last year, Thomas Cook. Of course, the management at AGS was doing initiative to backfill these gaps from these airlines. But then, of course, COVID-19 came along, and we have the drop in traffic that we showed there. Of course, now it's similar to Heathrow, with drops beyond 90%. Liquidity has also been addressed with a drawdown of GBP 38 million of facilities in March, with a closing cash position of GBP 61 million. No short of initiatives as well as with Heathrow, with OpEx coming down 20% in the year, and CapEx, 74%. Shrinking operations, resigning (sic) [restructuring] the organization, reduction of employees' compensation, removal of nonessential costs and discussions with governments regarding the reduction in the cost base and some employees have been furloughed and contracts outsourced. So again, very important initiatives here and also looking at the capital structure. Already talking to the bank syndicate, addressing the potential waivers that could be needed if this situation goes along the year. If we move now to the following slide to get into Construction. Here, the performance has been ahead of our expectations. In terms of revenues, ahead with good weather and good production mainly in Poland, but also good production in the U.S. This has also helped with good working capital management, a better activity cash flow than what we expected and compared to last year as well, and probably other first quarters that we have seen in our recent history. Okay. So while in the first quarter of 2019, there was an activity cash flow consumption a drain of cash. In the first quarter this year, we have seen positive activity cash flow of EUR 47 million. Really, in terms of COVID-19 impacting the first quarter, we saw some impact in Spain with some work stoppage, so that decreased a little bit execution in Spain and some higher costs from health and safety also because, I mean, even though there was some stoppage, some activity needed to be carried on in some of these works. Okay. But apart from this effect, in the rest was not apparent yet. In general, what we are seeing in the different countries, probably Spain is the exception, but in contrast like Poland -- in countries like Poland, the U.S., the U.K., Australia, there's an interest from the authorities for this essential sector to be active and ready and really operating and looking for the potential rebound of further activity once the economy gets out of the COVID-19 restriction. So in general, public clients have been helpful with liquidity in terms of days of collection. That has helped. And as I said, barring Spain, in general, we see really that this sector is high priority for -- in many countries. Okay. So in terms of the figures, the EBIT margin is as we expected, this part of the year pre-COVID, but of course, I mean, with the uncertainty of COVID-19 going forward, we will have to watch the evolution and keep you posted. So a better start to the year, but we'll have to see how COVID-19 impacts in the coming months. Okay. So we move to the next slide, in Services. Well, the -- probably the first news that you may have seen is that, in terms of the pending authorizations, the Australian Competition Commission gave the green light. We are only pending in terms of authorizations, the FIRB, the Foreign Investment Review Board's approval, and there's really nothing else. This is the, let's say, the only part pending for closing. And really, the rest is kind of in the back burner, I mean, ready to start when the economies reopen, but of course, we'll have to see how bidders that were looking at different subsets of our portfolio before COVID-19 started, how they come back, if they need to see how they trade. So I mean, in terms of valuation, as Begoña was saying at the beginning of the presentation, really, we haven't made projections how the market could look at projections of this business going forward. I mean, this is something that we'll probably have to see trade. Services provides a lot of essential services that will need to regain full speed. When this pandemic is over, maybe other services won't be that active. So maybe we'll have to see in trading. We have taken the view that we shouldn't be adding value just out of prudence. So we have really taken the net loss of Amey and for Ferrovial Services International as a reduction in their book value. So probably the best thing for me to do at this point in time is to tell you that our book value for Spain, Amey and International is below EUR 1.2 billion. It could be roughly split around EUR 800 million for Spain, EUR 200 million for Amey, well, a little bit short from that, and International as well. But as I said, this is a reference. We'll have to see when things reopen. And definitely, the kind of process with subsets that we were seeing at the beginning of the year is probably what makes more sense, but we'll keep you posted. Also, good news in terms of activity. Cash flow has been much better. I mean, usually, there's a drainage of cash in the first quarter as with Construction. This year, we saw much better performance than last year, EUR 33 million drain versus EUR 113 million. So it's trading in good shape. I mean, the impact really from COVID-19 has been more related to Spain, probably Spain's EBITDA that we are not reporting here has been affected like in EUR 7 million, but we'll have to see how the remainder of the year trades. As I said, the fact that we provide some essential services keeps activity going on, but we will have to see how things trade going forward. Okay. So we can now probably move to the consolidated P&L on the next slide to basically point out to some figures that we haven't discussed. So regarding the EBITDA number, in this quarter, we took a EUR 39 million provision. We will talk a little bit more about this in following slides. And this is the -- what's needed to achieve the running rate of savings of EUR 50 million per year from 2021. In terms of financial results, the financial result is very similar to last year, even though in terms of infrastructure projects, we have slightly less, given that we have the Ausol deconsolidation. And we have, on the other hand, lower refinancing costs from NTE, in general, but we have higher expenses from I-77 that was not fully opened last year, regarding the comparison. And this from the ex infrastructure projects, the main impact here is the -- from a plus 3 -- revenue of EUR 3 million in 2019 to an expense of EUR 2 million this year is the switch in the equity swap hedges for performance shares because there has been a drop, as you know, from the beginning of the year in the share price. Okay. So moving down to the equity accounted affiliates. You have the performance from the 407ETR, similar, some -- close to the first quarter 2019. This is thanks to lower financial expenses due to lower inflation. And then you have Heathrow that has an important swing. And here, you have the effect of the provisions for restructuring and write-offs of CapEx that, by the way, I should have mentioned that the write-off of CapEx is not a write-off of the regulated asset base. So it keeps earning a return. It's just a noncash expense. And also, we have the impact that is also accounting noncash from the decision by the government to keep the corporate tax rate at 19% instead of allowing the previously enacted 17% rate. This affects because you know that many of the big infrastructure companies in the U.K. have a deferred tax liability from the moment that the industrial building allowance was scratched, right? So amortization of infrastructure investment doesn't get a tax shield in the U.K. So that deferred tax liability increases with a higher tax rate. But as I said, it's a noncash item, it affects the account. That's the main driver of the change of equity accounted affiliates. It also affected, but in a lesser degree, to AGS. And then as we mentioned in the discontinued operations, instead of recording net income allowed by IFRS 5 without amortizing the assets in the business, we basically have decided to take these fair value adjustments. And we'll keep an eye on the evolution of the business post-COVID. I already gave you the kind of -- our book value numbers. So we reached a consolidated net income under the contributed of minus EUR 111 million, where you see that basically, there was a lot of one-offs that affected this net income. Otherwise, it would have been pretty much flat. Okay. So after this slide, we can move on to the next one being the net cash evolution. And here, you can see the main components, dividends from projects of EUR 129 million in the first quarter. Then we have the EBITDA, the working capital evolution that's better than other years. And I would like to highlight that you see, in shareholder remuneration, we're talking about the share buyback that you -- some of you probably noticed that we announced would start earlier this year, we have bought EUR 47 million in shares for buyback part of the program. Okay. So the -- I think that the quarter has been much better-than-expected, with a net debt variation, that means reduction of net debt or cash increase, really, of EUR 14 million versus a decline of EUR 326 million last year, so much, much better performance. Okay. So if we move to the next slide, we talk here about the new operating model that was announced in Horizon 24, that's more agile, innovative and efficient, and we have taken the provision for the streamlining of operations of EUR 39 million. We still expect to capture savings this year out of this initiative of roughly EUR 20 million. And that will enable us to capture a running rate of EUR 50 million annual savings from 2021. Okay. So we move to the -- closing slide before getting into the Q&A. Well, the Board -- I mean, looking at the better-than-budgeted activity cash flow and the solid financial position, has approved the first scrip dividend, EUR 0.312 would be paid to shareholders that ask the company for the payment in cash of the dividend. And for the ones that go for shares, 71 rights will be required for a new share. Of course, and this is something that's very important, the second scrip dividend will have to be decided upon the COVID-19 evolution and the business performance. So the company will keep monitoring this in these unprecedented and challenging times. Okay. So thank you for bearing with me. We move now to the Q&A session. And -- okay, I'll put myself on mute.

[Begoña Morenés;Manager-Investor Relations]

So if we start with the Q&A session. The first question comes from [ Tom Fuhrman ] from [ Hermes ]. I note that the I-635 is seeing construction works commencing in 2022. This appears to be a big feeder road to the LBJ Managed Lane. How do you expect this to impact traffic volumes and growth for the 5 years of those works?

[Ernesto López Mozo, Chief Financial Officer]

Okay. Well, we mentioned this project before. I mean, while the works are on, this will impact negatively traffic because basically, it will add to congestion at the end of that road. Once they open, we believe it adds a lot of value because that was a clogging part that prevented some people from getting into the LBJ just because they would end up in a traffic jam. So if you smooth that connection, it should add growth going forward. We don't have specific numbers to share and less with the current uncertainty, but we'll be providing updates as we get live data.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The second question comes from [ Gabrielle Megas ] from Bestinver. Given your best estimate of the pace of reopening of economies, when do you think the ETR and the Managed Lanes would recover pre-COVID traffic levels?

[Ernesto López Mozo, Chief Financial Officer]

Well, thanks for the question. I mean, really, we don't know what will be the pace of reopening and the pace of traffic recovery, okay? So we -- you will have to bear with us here, and we will update as we get more information, but it's very difficult to provide an estimate now. Still Toronto is on an emergency state situation, let's say, with people remaining at home, and we are starting to see some slight reopening of the economy in Texas. So it's very early to tell, but as soon as we get better visibility, we'll see how we can assess that. But right now, it's uncertain.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next set of questions come from Stephanie D'Ath from RBC. First question, how do you expect Managed Lanes to perform in a COVID-19 environment, where congestion is very low? Do you expect any revenue at all?

[Ernesto López Mozo, Chief Financial Officer]

Well, thanks, Begoña and Stephanie. Well, the only data that we have is the current one, and we are seeing traffic, of course, with an important drop that, in the worst moments, has been around 70%, then 60%, maybe 50-something percent, and 35% worst, even, performing better. So yes, that's bringing revenues. Still, the roads are connected and even though there's low congestion, connection to the different logistics center and so on is bringing traffic. That is data that we keep analyzing. We cannot provide an update now, except for what we showed in the slides, that is the fresher data that we have. Okay. So as I said, probably the good connection is helping the performance. It's early to tell. When we get more information, we'll see.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. Also from Stephanie, what is the ability of the 407ETR and the U.S. Managed Lanes to pay dividends to Ferrovial and defer CapEx?

[Ernesto López Mozo, Chief Financial Officer]

Well, actually, there's -- in the Managed Lanes, there's not that much CapEx. There was some CapEx going on around the NTE 1-2 that is likely to be postponed because it's more related to traffic conditions. And there's plenty of liquidity, right? So really, the decision will be based on the operating performance and will be decided probably first at mid-year and then at the end of the year. The liquidity and some recovery of traffic should allow for some dividends, but it's early to tell. I cannot give you, right now, any more detail than the level of liquidity that the assets have.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. Also from Stephanie and regarding Heathrow, what is the ability to take your share from London Gatwick in the current situation? And can you please give us an update on runway 3?

[Ernesto López Mozo, Chief Financial Officer]

Well, taking share from London Gatwick when there's no traffic really doesn't apply. I mean, we will have to see when the airline industry starts to do some initiatives like the, let's say, the sanitary passport has passport -- other initiatives that could allow traffic, we'll have to see then. Right now, there's no traffic at any of the airports. It's true that Heathrow usually brings synergies to airlines for connections and also because it's a preferred location for travel. So maybe that will impact, but we don't have the data, nor the information now to give any estimate.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. And finally, from Stephanie, can you please update on the Services divestment and potential increase in 407ETR stake in the current environment, which seems less favorable to pursue.

[Ernesto López Mozo, Chief Financial Officer]

Okay. Well, regarding the Services divestment, I already mentioned that we were working on different subsets before the COVID-19 situation. Those processes are now on hold. And definitely we will have to see, when the economy reopens how these different businesses trade. So it's too early. The only thing I can say, how it was looking before that started. I have already mentioned also the book values that we have. In terms of 407ETR stake, yes, there's a hearing of that right of first refusal, I will say, judgment. There's a hearing probably, maybe, in June, July, but then the decision could take a while. The message with the 407ETR is that, it's a very long asset where we still see value, okay? So we'll make decisions later on, but the message now, without any further information on how patterns could change is that, it's an asset that is needed in an area that keeps growing, and it's a long term asset. So it has still a lot of potential, but early to discuss valuations.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The following question comes from Victor Acitores from Societe Generale. At February, the guidance for operating cash flow of the company in Construction for 2020 was of EUR 300 million cash consumption. Is this guidance maintained in the current situation?

[Ernesto López Mozo, Chief Financial Officer]

Well, we started the year better. But now there's a lot of uncertainty, uncertainty regarding if production will be able to hold at current levels, or in some countries, you will be asked to stop. I mean, in terms of production, production is holding well in Poland, U.S., Australia, with some delays in, maybe, Spain and maybe some Latin American countries that [ weigh ] less. So here, really, it will depend on that. We have to -- we will have to update as you go -- as we go along because of the uncertainty. So far, we started better. But as I said, we cannot provide any guidance in the current environment. We'll keep updating.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next set of questions comes from Nabil Ahmed from Barclays. First question on 407ETR, what is the 407ETR traffic threshold that triggers a congestion payment? Has traffic fallen below that level during April? And it would be useful to remind the market how this mechanism works.

[Ernesto López Mozo, Chief Financial Officer]

Okay. So thanks for the question, I mean, the contract for the 407 for KPIs has a force majeure clause that considers a pandemic of force majeure. And when there's force majeure, really KPIs, I will say, don't apply. Really, this is something that has not been tested before, but clearly, the contract says that. And also, this, as you rightly say, is a congestion relief payment, right? So it's a payment if congestion in the alternative routes is not relieved. Right now, there's no congestion. I mean, there's a state, I think it's called a state of emergency. People have been asked to stay home. So there is basically no traffic, no congestion, right? So the sum of all that is that -- our interpretation is that it doesn't apply, right? So it's not worth discussing the mechanism in this presentation. We have different presentations when you can see how it works. The reason for this is that we don't consider it applies in this situation.

[Begoña Morenés;Manager-Investor Relations]

The next question on the Texas Managed Lanes. Thanks for sharing the traffic data at different points in time during April and May. Could you please also comment on pricing and what the lower congestion means for the value for many of the Managed Lanes? In other words, did you grant rebates to planned pricing to attract any traffic? And can you please share how much commercial traffic was accounting for in revenues for the different assets?

[Ernesto López Mozo, Chief Financial Officer]

Thanks for the questions. I mean, we are not displaying our commercial policy regarding the Managed Lanes. There hasn't been really much elasticity in the current traffic. We will have to assess when the market reopens -- when the economy reopens, how traffic flows. But here, really, there has been no major commercial plan so far in terms of rebates and so on. And well, you were asking also about the different share of commercial traffic and revenues and so on. We are not providing that information at this point in time for commercial sensitive reasons.

[Begoña Morenés;Manager-Investor Relations]

Thank you. The next question, what was the impact of the different mix in traffic for the average price of the first quarter of 2020 of the different assets?

[Ernesto López Mozo, Chief Financial Officer]

Well, this question is similar to the prior one to end up getting what kind of weight each segment has because we have provided what the tariff is from heavies and lights, right? We are not providing that, we are sorry, at this point in time.

[Begoña Morenés;Manager-Investor Relations]

Thank you. The next set of questions comes from Marcin Wojtal from Bank of America. Do you expect the LBJ Managed Lane to still pay a large initial dividend in 2020?

[Ernesto López Mozo, Chief Financial Officer]

We are not providing guidance there yet. If traffic recovers normally, not especially, yes, there could still be that possibility. But we don't provide specific guidance for the dividend in 2020 for LBJ.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. Also from Marcin, if the AGS Airports required external financing support, would Ferrovial be ready to inject capital into these assets?

[Ernesto López Mozo, Chief Financial Officer]

Okay. Thanks for the question. We don't expect to inject capital in our airports business affected by COVID because we see this as something temporary. It cannot be ruled out, but we don't expect it.

[Begoña Morenés;Manager-Investor Relations]

Thank you. And finally, from Marcin, do you still expect the disposal of Broadspectrum to be closed during 2020? Would there be any adjustments to the previously communicated price?

[Ernesto López Mozo, Chief Financial Officer]

Thanks. Yes, we expect to close it. And as I said, we're only dependent the Ferrovial approval. No, I mean, there could be some minor adjustments to the equity component. And then, of course, we would be, let's say, deconsolidating the net cash or net debt position of Broadspectrum. At this moment, the net -- there's a net cash position around EUR 70 million. So we would consolidate that, and that will be, let's say, like cash out from the perimeter that you're seeing now in the P&T, but we will get the -- substantially the equity of AUD 485 million, if I recall correctly, that's the expectation.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Daniel Gandoy from JB Capital Markets. The EUR 26 million working capital outflow in the first quarter is very low, and it doesn't include any seasonality, unlike previous years. What has been the drivers to explain the positive performance? Are there any meaningful prepayments or other extraordinary items behind this figure? Should we now expect a meaningful outflow during the second quarter to compensate for the first quarter performance?

[Ernesto López Mozo, Chief Financial Officer]

Okay. Thanks for the question. Well -- no -- really, what happened is that, in places like Poland, Budimex, for instance, really didn't get a lot of advanced payments at the end of 2019. And it has been producing well, weather has been good and days of -- payment by clients, days of collection have been short. So it has been a very good performance that, as I said, I mean, is partially related to some advanced payments, but most of it is really good days of collection and good cash generation, because of good production and shorter days of collection generally across the board, right? So here, if that keeps playing, because public clients keep paying in shorter days, that would help. Of course, if activity slows down because of COVID, clients ask to stop performance that could affect, for instance, in Spain, not in other countries. So the short answer is, no, we don't expect like a single drop relating to this first quarter. No. I mean if there's working capital affected, it would be because, in places like Spain, there could be a drop in activity. So far, it's working on a normal production all across the board with Spain some -- stoppage in some works, okay? So we'll keep an eye, but it's not like a single payment that has to be returned right away.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. Also from Daniel, there's a EUR 48 million negative figure at EBITDA level for others, of which EUR 39 million come from a restructuring provision. What is the driver of the other EUR 9 million?

[Ernesto López Mozo, Chief Financial Officer]

Okay. So -- and the other EUR 9 million, we have small components like mobility, some negative cost of the lack of activity. And the main component is overheads that were not charged to the services division this year like in the past year, right? So this has been the main effect on those EUR 9 million.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from [ Bertiki Varvisso ] from Norbolsa. Which event would imply the suspension of the second scrip dividend?

[Ernesto López Mozo, Chief Financial Officer]

We are not looking at any particular event, okay? So it's just across the board how performance is going in the different divisions. We haven't really assigned that to any specific event. It's just prudent as other companies are saying. I mean, the outlook is uncertain, could take more time to recover that, and probably it's better to hold to the cash for many reasons, even for corporate purposes that could be good investments that could come around, right? So there's no specific event that has been assigned for that decision. It's just overall corporate prudence.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Fernando Lafuente from Alantra. Can you give us any rationale regarding the potential evolution of dividends from 407, on the one hand, and the Managed Lanes on the other, just the building blocks to understand what could be the evolution of these dividends?

[Ernesto López Mozo, Chief Financial Officer]

Well, you have different things here. I mean, on one side, the Managed Lanes have accumulated cash from the outperformance of the past years and beginning of the year, and that's something that will get distributed at one point in time. And then the rest will come from the operational performance. In terms of the 407, there's also a similar situation. There's a lot of liquidity. It will depend on the operational performance going forward. That is what determines really the dividend performance on the medium and long term. We are not more specific on this regard. The only thing that we provide is the ample excess liquidity that they have, that, in time, should show to shareholders, but we won't be providing any specific timing or path at this point in time.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Elodie Rall from JPMorgan. What is your view on the likelihood for a U.S. infrastructure bill? And how it would impact Ferrovial's business?

[Ernesto López Mozo, Chief Financial Officer]

Okay. It's too early to tell about a broad infrastructure bill. I mean, we welcome all the infrastructure investment and much is needed in the U.S. We are really paying a lot of attention to projects that are being discussed by some Departments of Transportation, that involve more private initiative because they want to keep an eye on the public finances on the balance sheet, right? So for us, probably, that's where we are paying more attention. We welcome all -- that could be brought really of the much-needed infrastructure overhaul in the U.S.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Jenny Ping from Citi. On Services business, have you decided to only take the fair value provision losses and keep other contributions at 0? Can you tell us what the contribution would have been if you had taken the benefits?

[Ernesto López Mozo, Chief Financial Officer]

Yes. Thanks, Jenny. So instead of taking a hit of EUR 16 million, it would have been a profit of EUR 38 million, 3-8.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Ellen Elberfeld from Duff & Phelps. Heathrow makes up a large percentage of the dividend. If air traffic takes an extended period of time to return to 50% or 75% of 2019 levels, how will Ferrovial think about the dividend it pays to shareholders?

[Ernesto López Mozo, Chief Financial Officer]

Okay. So if the question is regarding if the Ferrovial dividend is based on the dividends from Heathrow, no, that would be a small part. And well, dividends from Heathrow, I mean, until there is a recovery, are not expected, you're right. So I mean, it should recover. We have to remember that this an airport that attracts airlines. When it recovers, air traffic recovers. You would also be looking to a new regulatory period and maybe you can really look at the value recovering at that point in time. So the main message is that we are not dependent on that. Of course, it has, but it's a small percentage and is not relying on that.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Sonia Baldeira from Bloomberg. What explains the construction activity improvements? Are there any particular works that can be highlighted?

[Ernesto López Mozo, Chief Financial Officer]

Well, the main impact here has been from favorable weather conditions, mild winter in U.S. and Poland explains most, well, the I-66, for instance, recorded EUR 100 million in production in revenues and ran partway EUR 42 million. Heavy civil works in Webber, EUR 160 million. So in Poland, also, there was heavy civil construction. So I would say it's the warm weather that has allowed for better production.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. Also from Sonia, do you see any emerging trends from COVID-19, for example, hospitals or care center projects?

[Ernesto López Mozo, Chief Financial Officer]

Well, everybody is talking about higher investment in different projects, including hospitals. But depending on geography, in the short term, there could be a decrease in bidding processes due to public finances, deficit and so on, right? So in terms of short-term talks, probably in Spain, there's less talk about projects coming to the market in terms of civil works. But in general, we should expect, in most countries, to -- important infrastructure, key infrastructure, to be addressed with any revamping of the economy, but it's a little bit early.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Luis Amusategui from Cygnus Asset Management. Can the reduction in traffic in the Managed Lanes bring a forced reduction in tariffs?

[Ernesto López Mozo, Chief Financial Officer]

Okay. Well, in -- the Managed Lanes base tariffs are set by the operator. They are not related to traffic, right? So it's not something that the traffic, per se, automatically changes the algorithm. So we have the base rates and then the algorithm works around that, but it's something set by the operator and not by traffic.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from José Manuel Arroyas from Santander. Will the 407ETR forgo the winter tariff scheme this year following the decision to skip the summer tariff scheme?

[Ernesto López Mozo, Chief Financial Officer]

There's no decision yet on that regard.

[Begoña Morenés;Manager-Investor Relations]

Finally, also from José Manuel Arroyas, Ferrovial's stance on tariffs in the Managed Lanes, how effective could it be lowering rates in the Managed Lanes to attract volumes? Would lowering the tariffs be a sensible tactic or could this hurt the perception of value for money?

[Ernesto López Mozo, Chief Financial Officer]

Well, at this point in time, with low traffic, there hasn't been much sensitivity -- much elasticity to different tariffs, right? So people are using the road probably because of how well connected it is and the fact that you can travel fast. In terms of the -- going forward, when the economy recovers, we'll have to assess it at that time. But right now, there's no data to discuss that. For the time being, what we have seen is almost no elasticity in the current traffic.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Robert Crimes from Insight. During April and May, have you reduced prices for the Texas Managed Lanes?

[Ernesto López Mozo, Chief Financial Officer]

There were some punctual reductions during a week. We cannot give more detail. And really, the reductions have been just for medical support urgencies, and that has been a more important drop. I mean, for this medical support has been a drop of 50%. For the reason, there were just some punctual stuff that is not worth mentioning.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Nicolas Mora from Morgan Stanley. Do you guys see a need to reinject equity into Heathrow in a bear case scenario of languished traffic recovery?

[Ernesto López Mozo, Chief Financial Officer]

Thanks, Nicolas. We don't see that at the moment. I mean we -- I mean, really, with this unprecedented situation, I mean, you cannot rule out things, but it's not really expected for many reasons. I mean, first is that there's ample liquidity. And for instance, at the holdco level, Heathrow Finance, as of today, you have something like GBP 400 billion of liquidity with the service around GBP 100 million that I mentioned, right? And do you have a new regulatory period starting in 2022, right? That would reset traffic, right? Of course, you could be in a worst-case scenario where there's a languish in traffic recovery, but that should be captured for 2022, or maybe even earlier if the regulator thinks so, right? So in the end, we don't foresee a need for that. But as I said, it cannot be ruled out.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. Also from Nicolas...[Technical Difficulty] Oh, geez. There's been a glitch in the system. I will get back to this question in a second. Bear with me just a second, please. Sorry. So once again, thank you. From Nicolas Mora. Finally, can potentially lower cost inflation in U.S. construction improve the outcome of the challenged projects, the I-66 and SR 400?

[Ernesto López Mozo, Chief Financial Officer]

Thanks, Nicolas, for the question. Well, there's different effects, some could work in favor and some against. Definitely, you could have lower prices for a construction materials. Also, you could struggle to get them produced, maybe, right? So what is true is that in the -- your downturn around 2010, '11, really that there was a benefit of that, but probably, there was no risk of shortage of production. So it's something that we are monitoring carefully, but we cannot tell at this point in time.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Tobias Woerner from MainFirst. I understand the provisions for a cost-saving programs for the group, but would like to get a better understanding of the exceptional noncash costs at Heathrow. What were the capitalized costs of GBP 52 million? How do you explain the GBP 30 million noncash costs for the transformation program?

[Ernesto López Mozo, Chief Financial Officer]

Thanks. Sorry, I mean, I'll explain the first one and probably with the second one, there was a confusion. In terms of the capitalized cost of GBP 52 million, that was CapEx that was, let's say, designed for investment like refurbishments or shops or commercial layout. Also that was incurred and is not foreseen in the future, right? So you have to write that down, but that was something that was authorized into the regulatory asset base, right? So right now, that's a write-off that is accounting, but the investment would keep generating an allowed return, okay. Then with the GBP 30 million cost for restructuring. It's not a cash cost in March, but it will be, for sure, right? So yes, this will be an outflow for restructuring, but it has not been an outflow in the first quarter. So probably I should have made that clear.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. Also from Tobias, can you provide us with an understanding of the fair value assessment and the book values mentioned, please?

[Ernesto López Mozo, Chief Financial Officer]

Okay. There's not much, let's say, science behind them, right? When we talked about the book values, the book values are really related with the kind of multiples that we were seeing for the businesses in the indicative biz that we were getting in 2019 and also from comparable transactions, right? So we have applied those multiples. And the book values, as I mentioned, are roughly EUR 800 million for Spain, EUR 200 for International and EUR 200 million for Amey. The rationale really for the -- taking the impact of this loss or not engrossing that, is that we don't know how these businesses will trade going forward. We don't know the multiples that would be there. So the only science behind that is, let's say, okay, we will keep that book value that, as you can tell, even with low EBITDA, it's a low EBITDA multiple in general, but there's not more science to that. And that's the reason why we say that we will -- as we get more information, we can better assess prospects going forward. Maybe we'll need some data, we don't know, okay? So it has just been a prudent approach of, let's not increase that book value. There's not any feedback from any bidder currently.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. And finally from Tobias, why the big swing in the minority line to minus EUR 13 million from the plus EUR 46 million?

[Ernesto López Mozo, Chief Financial Officer]

Well, that was -- that one is easy because, last year, the provision in construction was taken for global consolidated projects -- construction projects were basically -- minorities were -- they're part of the responsibility in the project, right? That's the reason why there was a positive in that -- in those minorities. Right now, it's the other way around. Minorities are from areas and businesses that are making money. That's the only reason in the swing.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Jenny Ping from Citi. It's a follow-up, please. On Page 4, the traffic chart, you showed traffic of March 28 to April 3 and then April 25 to May 1. Can you confirm the period in between? Did we see a similar fall in traffic?

[Ernesto López Mozo, Chief Financial Officer]

Yes, April saw similar falls in traffic from the -- like the first days of the months, give or take some small difference. Yes, basically, overall, April had that sort of decline.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next set of questions come from Anurag Aggarwal from York Capital. There's a substantial opportunity from greater e-commerce growth as a result of the recent virus. Can you help us understand how big commercial accounts are as a percentage of the 407, under Managed Lanes and the tailwind to growth that we might see from this acceleration?

[Ernesto López Mozo, Chief Financial Officer]

Well, thanks, Anurag. No, we don't provide that information and it's something that is as security, we are looking at the different potentially it could have, but it's not something we can share at this point in time.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. And finally from Anurag, please, can you clarify your comment on Page 6, when you say, heavy traffic has grown from 20% to 40% in March year-on-year. Is this growth of heavy traffic in the Managed Lanes year-on-year or the percentage exposure to heavy traffic in the Managed Lanes?

[Ernesto López Mozo, Chief Financial Officer]

Okay. What this means is the growth in revenue share for the heavy traffic. So in the road, where it has grown less -- so all heavy traffic has increased the revenue share in our toll roads. The lowest increase in revenue share has been 20% and the highest has been 40%. This is just illustrative because you don't have other data to do any model or compare. But we think it's a good example of the bigger and bigger share in this downturn situation.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Nabil Ahmed from Barclays. Is there any update on the U.S. toll road pipeline on Maryland, on others? What are the next steps? And when?

[Ernesto López Mozo, Chief Financial Officer]

Well, the next steps are now around May 20. We should be submitting the RFQ for Maryland, for the first project. And this, in theory, is scheduled to be awarded in February 2021. Also, we are looking to Georgia SR 400 to submit the RFQ this month. And well, there's other states considering things. There's dialogue, but things that is not for us to talk at this point in time, but there's activity and discussion even in this current scenario, to readdress them once there's reopening.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Marcin Wojtal from Bank of America. Have you taken any impairments of the value of the Spanish Services business in the last 2, 3 years? And if not, is it correct to say that the EUR 800 million book value that was mentioned for Spanish Services reflects the historical cost rather than updated assessment for the market value of the business?

[Ernesto López Mozo, Chief Financial Officer]

If I'll recall correctly -- I'll check on this, but we haven't taken any fair value adjustment on the Spanish business. I'll recheck, but that's my idea at the moment.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Alessandro Sala from Aventicum Capital Management. Could you disclose what your monthly cash burn in a zero-traffic assumption in the second quarter 2020 for Heathrow and AGS Airports would be?

[Ernesto López Mozo, Chief Financial Officer]

Well, Heathrow addressed what the expected cash burn could be. More than the average, probably, the last month of Q2 could be around EUR 170 million, but they are aiming to reach EUR 150 million later on. So I don't have the path -- the gliding path to that kind of level. And AGS, give or take, hovers around EUR 10 million per month with no traffic, as you were mentioning.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. The next question comes from Tobias Woerner from MainFirst. Sorry, apologies. The next question comes from Borja Castro from Engadine. Could you please remind us what the debt associated with the Services' assets is?

[Ernesto López Mozo, Chief Financial Officer]

Well, for the Services divisions, we have a net cash position, external of EUR 109 million. And as I said, there's a substantial part of this in Broadspectrum.

[Begoña Morenés;Manager-Investor Relations]

Thank you, Ernesto. These are all the questions we have in the system currently. I am unclear if this new system may have questions, which are in the process of entering. If there's anything which has not been answered, or which arrives after this comment, we will make sure to answer you after this call or via email. Thank you very much. I'll now pass the floor back to Ernesto.

[Ernesto López Mozo, Chief Financial Officer]

Okay. So thanks for attending the call and for bearing with us on these unprecedented times. We will follow all the behavior closely, and we'll meet you soon. Okay. Thank you. Bye-bye.