Indra Sistemas SA

MAD:IDR

Earnings Call Transcript 2019-Q1

[Operator]

Welcome to the Indra First Quarter 2019 Conference. I would like now to hand over to Ezequiel Nieto, Head of Investor Relations. Please, sir, go ahead.

[Ezequiel Nieto Baquera, Head of Investor Relations]

Good evening, ladies and gentlemen. Thanks, everyone, for joining us today on our first quarter '19 results presentation. I am Ezequiel Nieto, Head of Investor Relations. And before starting, let me refer you to the disclaimer on Slide #3 that sets up the legal framework under which this presentation must be considered.The conference call will be led by our Chairman and CEO, Mr. Fernando Abril-Martorell; and the intended duration will be around one hour.Now let me turn the call over to Indra's CEO, Fernando Abril.

[Fernando Abril-Martorell Hernández]

Thank you, Ezequiel. Good evening, and welcome to our conference call for the first quarter 2019 results. Today with me, I have Mrs. Cristina Ruiz, Chief Operating Officer of Minsait; and Mr. Ignacio Mataix, Chief Operating Officer of our Transport & Defence business. Mr. Javier Lázaro, our Chief Financial Officer, is also with us.If we move to Slide #4. As we always do, let me begin with our main headlines. Revenues and backlog continued to show the path of growth already seen -- that were seen in 2018. The backlog surpassed the EUR 4.2 billion threshold and grew 10%, resulting in the best ever figure. Revenues increased by 4% in local currency, and European-wide it was highlighting the good dynamics in Latin America, plus 11% in local currency and plus 7% in reported figures, with the main countries including Brazil posting double growth, and with lesser FX impact versus the first quarter of 2018. Regarding the performance of our 2 divisions, both Minsait and Transport & Defence showed revenue expansion. Within Transport & Defence, Transport & Traffic stood out, with both segments showing high growth in the quarter. For its part, Minsait sales also went up 4% in local currency, with Energy & Industry posting a remarkable performance. Digital solutions reached EUR 105 million, plus 21% at constant perimeter versus first quarter '18, and now it represents around 22% of Minsait sales. Regarding the margin evolution. EBITDA grew in absolute terms, plus 29%, excluding the impact coming from the IFRS 16 application. This implied an EBITDA margin of 8.4% in the first quarter of this year versus 6.7% in the first quarter of last year. Net income was down by 71% versus the first quarter last year. This is EUR 80 million in this first quarter versus EUR 11 million last year.To conclude, the first quarter results are in line with our growth and profitability prospects for 2019 as a whole. Our management effort is fully focused on achieving on the targets for the year, with special attention to the profitability EBIT of our operations. Now on Slide #5, we show our revenues performance in the first quarter. Revenues went up by 3% in reported terms, resulting in EUR 336 million. Revenues in local currency increased by 4%. FX impact amounted to EUR 5 million, which represents a lesser negative impact versus first quarter '18. Also, I would like to remind you that currency impact was EUR 23 million in the first quarter of '18 versus the first quarter of '17. If we move now to Slide #6, we'll get a deeper insight into the order intake and sales breakdown by region. In the first quarter '19, order intake increased by 8% in local currency, 9% in reported terms, affected by the decline in Spain, 11% down, mainly due to the difficult comparison versus the first quarter of '18 due to the renewal of last year. The relevant [indiscernible] BPO contract with a Spanish banking entity. EMEA contributed negatively, minus 58% in local currency, also affected by the difficult comparison versus the first quarter of 2018 when we've had a very relevant air traffic management contract booked.On the other hand, year of order intakes increased 24% boosted by some relevant contracts achieved by Minsait, particularly in Italy and Belgium as well as the [indiscernible] assimilation of Air Defence [ and radars ]. It is also worth mentioning America, 5%, plus 5% in local currency, due to the renewal of an important outsourcing contract in Colombia. The first quarter revenue figure in Spain increased by 4% with Minsait showing mid-single-digit growth while Transport & Defence remained flat. The first quarter sales in America increased by 11% in local currency, with both Minsait and Transport & Defence reporting growth. Countrywide, Brazil, the most relevant country in the region, posted revenue and order intake expansion, plus 8% and 5%, respectively. But it's also worth mentioning the performance of Colombia and Peru. The first quarter revenues in Europe were plus 2% in local currency. The increase of Minsait offsets the decline in the Transport & Defence business. And finally, EMEA sales decreased by 7% in local currency mainly affected by the difficult comparison versus last year due to the elections business. Excluding elections, sales would have increased at double-digit rates. If we move to Slide #7 of the presentation. Here, we display the backlog evolution of both Indra and our 2 divisions as well as the backlog over revenue last 12 months ratio. These 2 KPIs help us increase the visibility of our future growth. Over on the slide Indra backlog went up by 10% in reported terms. Let me also remind you that the backlog figure over EUR 4.2 billion threshold reaching a historic high. For its part Transport & Defence backlog increased by 13%, while Minsait backlog released an increase of 5%. Moving now to the bottom of the slide, interest backlog over revenue last 12 months ratio improved to 1.57 in the first quarter this year versus 1.26 in the first quarter last year. The Transport & Defence ratio improved to 2.25 versus 2.03, and the ratio in Minsait is to the 0.82 versus 0.79 last year.If we move now to Slide #8, to the group's EBITDA, EBIT and margin evolution. On the left side of the slide, you can see the performance of our EBITDA and its margin in the first quarter, both in reported terms and excluding the IFRS 16 impact. EBITDA posted double-digit growth in the first quarter '19 while EBITDA margin improved from 6.7% in the first quarter of '18 to 9.5% in the first quarter of this year. If we were to exclude the IFRS 16 impact, EBITDA would have grown plus 29% in absolute terms, resulting in an EBITDA margin of 8.4% in the first quarter, or 1.7 percentage points of improvement versus the first quarter of 2018. On the right-hand side of the slide, we disclose the EBIT and EBIT margin evolution. EBIT reached EUR 39 million, equivalent to 5.2% EBIT margin in the first quarter '19 versus EUR 26 million, equivalent to 3.6% EBIT margin in the first quarter of last year, implying a growth in absolute terms of 49%, backed by the improvement of the operational profitability and despite the lower contribution of the election business. Both Cristina and Ignacio will get deeper into the contribution of Minsait and Transport & Defence in the EBITDA and EBIT performance. 80% of our EBIT is coming from our Transport & Defence business as you can see at the right of the bottom of the slide. And finally, from my side, on Slide #5, just a reminder of our guidance for 2019 and how we are doing so far. Okay, so I just finished the headlines and operating review of the group. And now I would like to pass the call to Ignacio Mataix, our Transport & Defence Chief Operating Officer, who will present the results of the Transport & Defence division.

[Ignacio Mataix Entero]

Thank you, Fernando, and good evening to everyone. Now let's -- let me move into Slide #10, where you will see disclosed both the order intake and the revenues breakdown of the 2 business in our Transport & Defence division. The graph on the left shows evolution of our first quarter 2019 order intake, which decreases by 16% in local currency and reported terms, impacted mainly by the strong order intake of Air Traffic Management in the first quarter 2018 where a relevant contract in Algeria took place. On the positive side, both the transport segment, it was worth noting the positive dynamics in Spain and Defence & Security boosted by relevant contracts signed in Europe recorded double-digit growth. On the right-hand side, on the graph on the right-hand side, we show the evolution of our first quarter 2019 revenues. Revenues in Defence & Security went down by 4%, both in local currency and reported figures, impacted by the lower activities in Radars & Electronic Defense, space and airborne vehicle systems. On the contrary, Transport & Traffic revenues increased by 11% in both local currency and reported terms. Transport registered a 70% revenue growth in local currency, backed by relevant contracts in America, mainly urban traffic in Peru and tunnel control systems in Mexico and Colombia. And in EMEA, railway control systems in Middle East and tunnel control systems in Egypt and Algeria. [ Day ] traffic management segment posted a 6% revenue growth in local currency, thanks to the European and international programs, which continue benefiting from good dynamics. Now please find on Slide #11 the EBITDA and EBIT under respective margins evolution of the Transport & Defence division for the first quarter of the year. On the top left graph, EBITDA in the Transport & Defence division, which includes the impact on IFRS 16, reached EUR 41 million in the first quarter of 2019 versus EUR 40 million in the same quarter of 2018, affected by the higher restructuring costs that took place in the first quarter. Excluding the impact of IFRS 16, EBITDA would have amounted to EUR 39 million. EBITDA margin improved from 50.4% in the first quarter of 2019 from -- to 15.7% in the first quarter of 2019. As you can see, on the top-right graph, EBIT in absolute terms slightly decreased from EUR 32 million in the first quarter to EUR 31 million in the same quarter of 2019. EBIT margin in the Transport & Defence division stood at 11.8% in the first quarter of 2019 versus 12.5% of the last -- in the same quarter of last year, again due to the higher restructuring cost versus the 2018. I just did the review of Transport & Defence, and I would like to pass the call over to Cristina Ruiz, our Minsait Chief Operating Officer, for the review of Minsait.

[Cristina Ruíz Ortega, Senior VP of IT & Executive Director]

Thank you, Ignacio. Good evening, everyone. Let's move now to Slide 12 where we saw the order intake and revenues breakdown of Minsait. On the left-hand side, the first quarter maintained order intake decreased by 5% in local currency, impacted by the strong order intake registered last year in the same period when a renewal of an important multiyear BPO contract with a Spanish banking entity took place. On the right-hand side, we saw our revenues performance but [indiscernible] is worth mentioning that the 21% growth recorded by our digital solution unit, which represents now 22% of Minsait sales. In this area, as we have already explained, we work the project related with innovation, digital customer experience, process organization and science including our banks analytics and cybersecurities. And all these area will have a strong growth rate. Back to the first quarter '19 revenues. Sales went up by 4% in local currency, with all verticals registered for this same growth except public administration and healthcare, affected by the difficult comparison versus the first quarter of '18 due to the election business in EMEA. Energy & Industry revenues decreased by 16% in local currency -- increased 16% in local currency being by the Minsait verticals posted the best performance in this period. The double-digit growth achieved in Energy was remarkable backed by the utilities and the retail sector. Financial Services sales increased by 2% in local currency, helped by the good dynamics of the Minsait banking in Spain. Public Administration & Healthcare sales slowed down by 8%. As already explained, we have the impact of the first quarter election business in EMEA and if you recall comparison with this year. Excluding the election business, sales increased by 9% due to the good dynamics of the Public Administration in Spain and Europe, especially in Italy. Telecom & Media revenues grew up by 4% in local currency, mainly due to the higher activities registered in Spain and LatAm. Let's move now to the Slide 13 to present Minsait profitability. On the left-hand side, you can see the evolution of Minsait operating margins. This operating margin excludes exceptional costs that we mentioned in the footnote of the slide. Operating margin in absolute terms reached EUR 13 million versus EUR 7 million in the first quarter of '18, and the operating margin was 2.7% versus 1.5% in the first quarter of the year. On the right-hand side, you can see EBIT totaled EUR 7 million versus minus EUR 6 million in the first quarter of '18, and the EBIT margin was 1.6% versus minus 1.3% last year. All the verticals registered marked an improvement, despite the lower contribution of the election business. With this, I finish the review of Minsait results. I would like to pass the call over to Javier Lázaro, our Chief Financial Officer, who will review the financial performance of the company.

[Javier Lázaro Rodríguez, Chief Financial Officer]

Thank you, Cristina, and good evening, everyone. Let's start the financial review with the evolution of the free cash flow on Slide 14. On the top half of the slide, we display the quarterly performance of this metric over the last 2 years. As you can see, in the first quarter, we had a negative generation of EUR 108 million versus negative generation of EUR 6 million at first quarter last year. This performance was mostly driven by seasonal and temporary valuations in working capital that we will explain in more detail in the next slide.On the bottom left-hand of the slide, we show the cumulative free cash flow for the last 12 months with EBITDA up this quarter to EUR 66 million. This decline versus previous periods reflects mostly the delta in some large collections that we had in the first quarter 2018, which we didn't have in 2019. We are talking about some election business payments and some payments coming from the Minister of Defence in Spain, as well as the buildup of inventories that has occurred during the first quarter 2019 that we will review a bit later in the presentation. Moving now to the bottom right-hand side of the slide, we can see the free cash flow before working capital which is the guidance, the metric we give guidance on, which amounted to EUR 31 million versus EUR 29 million in the same period last quarter -- last year, which implies an increase of 9%, which is helping us to gain confidence as Fernando mentioned at the beginning to reiterate the guidance from cash flow generation in the year and the underlying dynamics that continue to be positive on that front.If we now move on to Slide 15. We can see the increase in net debt, EUR 592 million, which reflects the performance of the free cash flow that we discussed just now. Operating cash flow was once again the main contributor to free cash flow generation with EUR 56 million positive. What we call on the slide cash flow from operations, which is basically the working capital, was the principal drag on the cash flow generation. And this item was negatively affected in part by the advances that received in 2018 that were corresponding to inflows that were originally expected for the first quarter of 2019, as we discussed in the call, in the last full year results conference call, as well as, in this case, the increase in the inventories that we will explain a bit farther on in the presentation.CapEx amounted to EUR 18 million, which is slightly higher than the figure in the first quarter last year, but in line with investment commitment that we announced as part of our strategic plan in -- for 2018-2020. Cash taxes where negative EUR 5 million, which compares to a positive inflow in 2018 of around EUR 10 million, which basically reflects the fact that we received them in that period. In this period last year we received some tax refunds from the Spanish authorities that we did not receive in this year -- in this quarter. Financial results net payments or payment for financial expenses was EUR 3 million, a similar figure to that in the previous year. And finally, financial investments in all customer et cetera was negligible amount, roughly EUR 1 million. So if we now move on to Slide 16, and we analyze the evolution of the working capital. So far this year, I think the most relevant part to discuss is the increase in the inventories that was 7 days of trading, which is roughly EUR 60 million. And there are 2 main reasons for this. I think it took different categories for the increase. One is the -- coming from the increase in investment in stockpiles in some of our manufacturing facilities and related to the accumulation of the advanced production of some specific projects which ultimately trying to improve our time-to-market. We're talking here about building advanced parts of radars or simulators for civil aviation devices. And then the second element apart from this stockpiling is the increase in working progress that has to do with the accounting treatment of a number of our projects that work on the basis of milestones. And as you know, until we achieve the milestones, we don't recognize the revenue or the cost associated to it, and we increased our inventories accordingly. Those 2 elements explain the variation in the working capital, which, I think is the most relevant item to discuss on these inventories, which is the most relevant metric to discuss in the working capital.Payrolls worsened in 6 days of trading but this is mostly due to the seasonality of the first quarter, and the impact of the advances that we saw from the year before. But this number is better than the performance that we had in similar -- in the same period last year. So this is something to be expected. On the other hand, the accounts receivable remained almost in line around flat with slight increase of 1 day of trading. On Slide #17, we show the evolution of our net debt and the leverage ratios. Net debt amounted, as we said before, to EUR 592 million, which basically translates the impact of the evolution of free cash flow in the quarter as we've discussed. But net debt-to-EBITDA stood at 1.9x at the end of the quarter versus 2.3x at the end of March last year, or 1.6x at the end of 2018. Please note that we have eliminated from these calculations the impact of the IFRS 16 on operational leases from both the numerator and the numerator. So these numbers are excluding the impact of this new rule and makes them consistent with the numbers reported in previous years. As is normally the case our nonrecourse factoring lines remained stable at EUR 187 million, the same figure as we reported both in March last year, in December and actually pretty much every quarter for the last 3 or 4 years. And now we finish the presentation with a quick review of the structure of our debt and maturity profile on Slide 18. If you look at the table on the left-hand side, you can see how the cost of debt is reduced slightly, thanks to the continuing optimization of our credit facilities. On the right-hand side, as you can see, how our gross debt comprises a wide range of financing sources from corporate bonds to convertible bonds to bank facilities, R&D loans and a number of other facilities. But we also retain a significant flexibility, financial stability, with a comfortable liquidity cushion made up both of cash as well as available credit facilities. Slightly below in the table, you can see the evolution of the average maturity of debt, which goes down as the year progresses, 3.8 years now versus 4 years at the end of last year. We keep enjoying, in any case, a good, very low level of maturities in 2019 and 2020, which is less than EUR 50 million per annum, which compares with around EUR 300 million that we had in the same point last year. With this, we finish the results of the presentation. Thank you very much. And let's move on to the Q&A session.

[Operator]

[Operator Instructions] The first question comes from Ivón Leal Macia from BBVA.

[Ivón Leal, Research Analyst]

Maybe if I may, I have like 2 questions on the Transport & Defence business and then afterwards another 2 on the IT business. So on the Transport & Defence business, I don't know if you could tell us or give us a sense of what have been the evolution of each segment within the division. Because I guess maybe the slight contraction in margins, I wonder if it has -- it's basically a mix effect on the fact that on the quarter you're growing more on transport and air traffic business. And the second one, I don't know if you could put a number to those restructuring expenses on the overall company and on the Defence and IT business.

[Fernando Abril-Martorell Hernández]

Okay. Let me -- this is Fernando. Let me answer to the first one. The first quarter restructuring charges for the whole of the company have been EUR 5.7 million, of which EUR 3.6 million have been in the Transport & Defence division, and EUR 2.2 million in the IT division, in Minsait. Don't forget that the big restructuring of Minsait, it's already done. That doesn't mean we continue to lose things but the big block of the restructuring was already done. So you should expect this year to have more impact of the restructuring on the Transport & Defence division, okay? And then the question about the verticals on the Transport & Defence division, Ignacio?

[Ignacio Mataix Entero]

Yes, well, I think Fernando explained basically the difference on margin is based on the restructuring cost, which as Fernando said are EUR 3.6 million in the first quarter. I think that's basically the difference. I think with regard to the growth, I think there's very, very positive growth in Transport. And also in Traffic, we have had, as I mentioned, a few very good contracts in Transport, with growth of 11% in sales in Transport. And also I think we see growth in contracts, also in air traffic management in Europe and outside Europe, while we see Defence slightly more flat at this time, but growing in the longer term.

[Ivón Leal, Research Analyst]

I think on the transport, I think you were about breakeven last year in margins. I don't know how you feel about the prospect of achieving maybe mid-single-digit going forward?

[Ignacio Mataix Entero]

I think we are positive on growth in Transport, both in revenues and in margin.

[Ivón Leal, Research Analyst]

Okay. And then 2 very quick ones on the IT business. I think these are one which are most affected by these 3 impacts. I don't know if you could share with us -- give us a sense of what has been the impact of in the division? And the second one is -- I mean it's very difficult to get a sense of how is the performance in margins given the volatility on the quarterly results, but I don't know if the delta we've seen in margins in this first quarter give us a good sense of what we should see the rest of the year in the division.

[Javier Lázaro Rodríguez, Chief Financial Officer]

Okay. Yes. I mean the delta is basically EUR 7 million. That's the impact of Easter for the whole of the group. The impact last year, you remember, it was EUR 13 million negative. And this year it's EUR 7 million positive. That's the comparison of the working hours which is how you have to do it. Okay, so basically that's for the whole of the group. But which basically EUR 3 million is IT and EUR 5 million is Transport & Defence.

[Ivón Leal, Research Analyst]

But that is revenues? Or that is EBIT? I don't know.

[Javier Lázaro Rodríguez, Chief Financial Officer]

That is EBIT. That is EBIT, okay?

[Operator]

The next question comes from Alastair Nolan from Morgan Stanley.

[Alastair P. Nolan, Research Associate]

Could you just maybe talk a little bit more about the work in progress lengthening within working capital? I just want to get a better sense as to what actually is happening there. And then just a point of clarification. You mentioned the restructuring in Transport & Defence, was that -- that was EUR 3.6 million in the first quarter? Or I just wasn't sure if I got those numbers right. So maybe if you could just reiterate them as well, please.

[Javier Lázaro Rodríguez, Chief Financial Officer]

Yes. I think that's correct. It's EUR 3.6 million in the first quarter.

[Alastair P. Nolan, Research Associate]

And for the group, the restructuring number was?

[Javier Lázaro Rodríguez, Chief Financial Officer]

It's EUR 5.7 million for the total.

[Alastair P. Nolan, Research Associate]

Perfect.

[Ezequiel Nieto Baquera, Head of Investor Relations]

And with respect to work in progress, what this is, is basically in part is IFRS 15, in part is the same mechanics as the IFRS 15 for projects in which this is not applicable. And the way the rule works and the mechanics we work out are such that if the project is midterm project and is subject to some milestones, we don't recognize the revenues and the margin associated to that project until certain milestones are met. In the case of IFRS 15, that has a special -- its own way of meeting and approving those milestones in the case of price that are not subject to that but they still work on a milestone basis. We have our own rules, which are basically the same as IFRS 15 even if they are not directly applicable. So what has happened in this quarter, the result of those 2 things, there's been abolition of cost of projects that have not gone through the respective milestones. It doesn't mean that those projects are delayed, it just means that the milestone was not due in time for the end of the quarter, okay? Some projects may be delayed and, but so it's not probably this delay. So there will be some delays in a combination of the milestones not having happened at the time. But this is the mechanic of why that happened. And this in total amounts in the quarter to around EUR 40 million. So the EUR 60 million delta of the inventories, the EUR 40 million is because of this impact and EUR 20 million is because of the stockpiling of materials, which basically tend to help us with the mark-to-market in some specific projects. And some potential markets, sorry. It's small.

[Alastair P. Nolan, Research Associate]

And -- sorry, go ahead, sorry.

[Fernando Abril-Martorell Hernández]

No, no, to quote a couple of examples and grade us, which -- the fact that we can produce net tons allows us to beat competitors' timing and allow us to be more competitive in some specific quarters and also the preparation of civil aircraft simulators, which again are, in both cases are devices that take a long time to produce and if we produce them on demand, we run the risk of not being competitive. All of this is the kind of measures that we already told the market we were going to be doing more of during the strategic review.

[Alastair P. Nolan, Research Associate]

Understood. And just to go back on the work in progress, there's nothing there then that's kind of, as you said, unexpected in terms of delays that weren't planned. This is purely kind of a recognition and accounting procedure?

[Fernando Abril-Martorell Hernández]

Yes. I mean, that's correct. That's correct. There is nothing specific that we feel it's lagging behind or anything.

[Operator]

The next question comes from Carlos Treviño from Santander.

[Carlos Javier Treviño Peinador, Equity Analyst]

I would have 2. The first one is on the Defence business. You are -- your orders have been growing significantly this quarter, plus 21%. I don't know if you could give us any idea of when we could we start to see these materials in revenues? My second question is on working capital. Now is this difficult that with your current visibility and how do you see your working capital evolving in Q2, and if possible in the second half of the year?

[Javier Lázaro Rodríguez, Chief Financial Officer]

Well, yes. I think we've had new orders in Defence in the first quarter. As you know, these projects are slightly long-term deliveries, because you have a lot of development work. And then you have to do the manufacturing and delivery. So it will take some time until we see those coming up into our revenues in the company. So you could think that between 6- to 9-month delay from when we get the orders.

[Fernando Abril-Martorell Hernández]

And with respect to working capital for second quarter, second quarter is traditionally a weak quarter. So we don't expect the second quarter to be any better than the quarters before. There could be a bit of catch-up from some of these projects, but it's probably not going to be material. And second half, it's much more difficult to give any specific guidance. We have the impact of the last few days in December, which is very material. We're talking about over EUR 100 million, so that would be difficult for us at this point to mention. I mean what I can tell you is that this is what we see at the moment. There is nothing here at this point is worrying us, in terms of working capital dynamics. All of that with a caution in that we have to have when it comes to talking about working capital. Some of the projects that we were talking about, that we were talking projects in Saudi Arabia and projects in Spain, various number of places, sometimes we can be more unexpected that we would like them to be. And we could have positive or negative surprises plus the year in effect. So I think what we can see at the moment, Q2 should be kind of weaker Q2. And later on in the year, it's always difficult to tell. But today, there is nothing that makes us raise any alarms on that front.

[Operator]

The next question comes from Bosco Ojeda from UBS.

[Bosco Ojeda]

I had a couple questions. The first one, just to clarify, maybe I misunderstood, but I think you mentioned the Easter season impact was negative last year, EUR 13 million, and is positive this year at EUR 7 million of EBIT. That would be EUR 20 million difference. Sounds quite a lot given the EBIT improvement for this year is more or less on that range. So maybe I got that figure wrong. Second question is on the depreciation. I think you reported EUR 32 million amortization and depreciation, that's up 44% and it's a lot higher than the CapEx, which is not going as high as that. Maybe there's some IFRS impact or something, but it looks to me quite high. I'm not sure if that is some explanation for that.

[Fernando Abril-Martorell Hernández]

Okay. No the reading you're making is wrong. Because last year when we compared the first quarter '18 versus the first quarter '17 it was the Easter effect was helping us EUR 13 million. When we compare this year with last year's, the Easter effect, it's helping us in the comparison this year, plus EUR 7 million. But you should impact because those are comparisons with different years. Okay, I don't know if I'm explaining it myself, okay? So if we were to compare truly the first quarter this year with the first quarter last year, because on the last year, we've had the Easter within the quarter and this year we haven't. We have more working hours this first quarter this year than last year and that's in a total of EUR 7 million EBIT, okay? Bottom line. When we compare last quarter to 2017 -- sorry, first quarter last year with 2017 first quarter because on the first quarter of '17, it didn't have the Easter. And last year it did have the Easter within the quarter, because of the difference in working hours, it affected us negatively versus '17, EUR 13 million. So the delta here is EUR 7 million positive.

[Bosco Ojeda]

Okay. Is that...

[Fernando Abril-Martorell Hernández]

We can give you -- if you have any -- I mean we can guide you through in more detail if you want later with our Investor Relations people, okay? Then the depreciation and amortization increased for 2 reasons. One is the IFRS 16 application, which is EUR 8 million impact, okay? And then, because we are starting to amortize intangible assets that we have just been finishing and because we managed to finish them in the research and development phase and we're starting to commercialise and therefore, we start to depreciate. And that's our EUR 2 million FX. In total, that's growing EUR 10 million, a, because of IFRS 16, and 2, because of sort of a normal depreciation charges, which are growing because we still -- we're not growing proportionately to the depreciation, but higher, okay? Is that okay?

[Operator]

[Operator Instructions] The next question comes from [ Macha Yen ] from Crédit Suisse.

[Unknown Analyst]

It's actually just a quick clarification if you don't mind. You mentioned a couple of numbers about the delta in the working capital and the outflow this quarter. I just want to make sure is the total down -- the EUR 60 million out of EUR 20 million from stockpiling and the EUR 40 million from the work in progress? Or is that EUR 60 million from stockpiling?

[Javier Lázaro Rodríguez, Chief Financial Officer]

No, it's EUR 60 million in total. EUR 20 million stockpiling, EUR 40 million work in progress.

[Ezequiel Nieto Baquera, Head of Investor Relations]

Okay, I think there's no more questions, no? So we just close the call here. Thank you very much for attending our conference call. And as always, if you have any other question, please don't hesitate in contacting us. Thank you very much. Bye.