Ellaktor S.A. (ELLAKTOR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Gaeli, your Chorus Call operator. Welcome and thank you for joining the Ellaktor Group conference call and live webcast to present and discuss the bondholders' briefing on the full year 2020 Ellaktor's Restricted Group results. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Aris Xenofos, CEO, Vice Chairman of BoD, Ellaktor Group; Mr. George Poulopoulos, CFO, Ellaktor Group; and Mr. Dimitrios Koutsoukos, Director, Business Planning and Investor Relations. Mr. Xenofos, you may now proceed.

Thank you. Good afternoon, ladies and gentlemen, and good morning to our colleagues joining us from the U.S. Thank you all for dialing in to Ellaktor's 2020 Restricted Group financial results report. Before I give you an overview of our Restricted Group performance and business segments, let me start with a few words about the current macroeconomic environment. For Greece, the full year impact of COVID-19 translated to a strong GDP contraction of 8% for 2020 and an increase in unemployment from 17% to 22% amongst other negative metrics. Nonetheless, there are positive messages from the Greek economy. Since the beginning of 2020, the Greek state has successfully completed 7 oversubscribed international debt markets transactions, raising EUR 18 billion at historically low levels. On top of that, in March 2020, Greece issued its first 30-year bond since January 2007, another milestone towards the country's return to normality in international capital markets. Now looking at Ellaktor's Restricted Group. Despite 2020 being a challenging year with the pandemic significantly impacting Concessions, overall performance showed resilience underpinned by strong performance in Renewables. Restricted Group's EBITDA stood at EUR 172 million for financial year 2020 compared to EUR 192 million in 2019, with the EBITDA reduction attributed mainly to the significant impact of COVID-19 on the Concessions business. EBITDA margin in 2020 was 46% compared to 53% in 2019. Cash and liquid assets at the end of December 2020 stood at EUR 298 million versus EUR 342 million at the end of 2019. And finally, debt as of the end of 2020 stood at EUR 752 million versus EUR 625 million at the end of 2019 with a debt-to-EBITDA ratio of 4.4. Now looking at the group's business segments. In Concessions, performance was significantly affected by the pandemic and lockdown measures imposed by the state, with Q2 being particularly adverse. EBITDA in Concessions stood at EUR 109 million in 2020 compared to EUR 143 million in 2019 and decreased by 24% due to the lockdown. Indicatively, Attiki Odos traffic in 2020 decreased by 27 -- sorry, 24%, while revenues decreased by 21% versus last year. In Renewables, business posted very strong revenue and EBITDA growth, unaffected, of course, by the COVID-19. EBITDA grew at EUR 73 million in 2020 compared to EUR 50 million in 2019, up by 47% as a result of the increased installed capacity, which stands at 493 megawatts today. In Environment, EBITDA stood at EUR 4.2 million in 2020 versus EUR 6.7 million in 2019, down by 38%, impacted by one-off items with negative impact of EUR 7 million. Before I pass the floor to George, I want to express -- let me take the opportunity of this public communication that we have and express my sincere thanks and gratitude to shareholders who approved the BoD-proposed capital increase during last week's general meeting. I need to say that last week's share capital increase approval was a milestone for the group and sent a clear message regarding the group's future, a message of loyalty and alignment towards a common vision, an undisputable trust to all our stakeholders and the potential for growth for the group. And with that note, I will now pass the floor to George to run you through our group financials in detail. Thank you.

Thank you, Aris, and thank you all for joining us. I remind you that the Restricted Group financial information has been prepared in accordance with IFRS, except for the accounting treatment used for the Unrestricted Group. In specific, investment in Unrestricted Group represents the net equity of the subsidiaries included in Unrestricted Group and, more specifically, subsidiaries under the Construction segment, Real Estate segment and Moreas SA. During the periods presented, the Restricted Group functioned as part of the larger group of companies controlled by Ellaktor. Also, the financial information of the Restricted Group is presented prior to elimination entries related to investment in subsidiaries and intercompany loans, liabilities to and receivables from companies forming the Unrestricted Group. Last, the accounting policies used in preparing this financial information are in accordance with those used in preparation of the annual financial statements for the year ended 31st of December 2020. Following that introduction, I would like now to present the 2020 results by following some slides from our 2020 Restricted Group results presentation. On Page 3, we have the highlights of 2020. EBITDA stood at EUR 172 million in 2020 compared to EUR 192 million in 2019, posting a reduction of 11% or EUR 20 million, mainly due to Concessions, which was down by EUR 34 million, while RES was up by EUR 23 million. In Q4 '20, EBITDA was at EUR 31 million versus EUR 33 million in Q4 '19, down by 6% despite the significant impact of COVID-19 on the Concessions business. Cash and liquid assets decreased by EUR 29 million in Q4 '20, reaching EUR 298 million at the end of 2020 versus EUR 342 million at the end of 2019. Turning to Page 5 of our presentation. You see the evolution of key P&L items. Restricted Group net revenue stood at EUR 372 million in 2020 compared to EUR 359 million in 2019, an increase of EUR 30 million. The year-on-year decrease of EUR 31 million in Concessions was offset by increases in revenue of EUR 30 million and EUR 50 million in the Renewables and Environment, respectively. EBITDA margin stood at 46% in 2020 versus 53% in 2019. Net profit, excluding the share of loss from the Unrestricted Group, stood at EUR 47 million versus EUR 84 million in 2019. On Page 6, you could see that the net debt stood at EUR 752 million at the end of 2020 compared to EUR 625 million at the end of 2019, with net debt-to-EBITDA ratio standing at 4.4x. On Page 8, you see the analysis of P&L for 2020 and 2019. I would like to point out the resilience our Restricted Group showed where EBITDA decreased by 11% despite a 24% decrease in Concessions. The decrease was offset by a strong increase in RES EBITDA, which grew by 47%, reaching EUR 73 million. On Page 11, total assets were at EUR 1.703 billion at the end of 2020 versus EUR 1.837 billion at the end of 2019, recording a delta of minus 7%. Restricted Group total equity stood at EUR 332 million at the end of 2020 compared to EUR 533 million at the end of 2019, a decrease of EUR 200 million due to the negative results of the Unrestricted Group. On Page 13, we present the cash and liquid assets at the end of 2020 that stood at EUR 298 million versus EUR 314 million from end of June '20 and down from EUR 342 million at the end of 2019. At the end of March '21, marked cash and liquid assets improved slightly to EUR 301 million versus EUR 298 million at the end of 2020. On the right-hand graph, you see the quarterly evolution. In Q4 '20 and Q3 '20, operating cash inflows amounted to EUR 36 million and EUR 34 million, respectively, both improved compared to Q2 '20, which was impacted mainly from the lockdown impact of -- on Concessions. Investment cash outflows amounted to EUR 28 million in Q4 '20, while cash inflows from financing activities reached EUR 6.5 million in the last quarter of 2020. Now let me go through the segmental analysis of 2020. On Page 16, we have the Concessions highlights. Revenues stood at EUR 176 million in 2020 versus EUR 207 million in 2019. The decrease of revenues in 2020 is due to the decreased traffic in Attiki Odos by 24% as a result of restrictions in movements and eventual full lockdown by the state in response to the COVID-19 pandemic. As you see on the bottom left diagram, traffic evolution follows the imposition and lifting of measures to combat the spread of COVID-19. The current lockdown is significantly lighter than the first lockdown in March '20, which can be seen by the growth in traffic year-on-year starting in March 2021. Concessions EBITDA amounted to EUR 109 million in 2020 versus EUR 143 million in 2019, marking a decrease of 24%, where EBITDA in Q4 '20 amounted to EUR 21 million versus EUR 32 million in Q4 '19, decreased by 32%. On Page 17, we present the RES highlights. Revenues stood at EUR 94 million in 2020 versus EUR 64 million in 2019 or up by 47% year-on-year due to the increased installed capacity of 493 megawatts as of end of December '20 versus 401 megawatts a year earlier. As we have indicated, the growth plan for the Renewable business is underpinned by the strategic agreement with EDPR. Already, we have added projects of approximately 490 megawatts that we are going to develop jointly. EBITDA stood at EUR 73 million in 2020 versus EUR 50 million in 2019 or up by 47% year-on-year due to the increased installed capacity, as I mentioned earlier. In the last quarter of 2020, RES EBITDA amounted to EUR 19 million versus EUR 11 million in Q4 '19, marking an increase of 80%. On Page 18, we have the Environment segment highlights. Revenues stood at EUR 102 million in 2020, up from EUR 87 million in 2019 or plus 17% year-on-year due to the increased completion rate of construction projects. 2020 EBITDA was negatively impacted by one-off items of EUR 7 million and stood at EUR 4 million in 2020 versus EUR 7 million in 2019. Without those one-offs, out of which EUR 3.2 million related to Osnabruck projects, EUR 2.7 million to unexpected court decision for a 2010 case and EUR 1.2 million to RES levy, Environments EBITDA would have been at EUR 11 million in 2020. This concludes my presentation of Restricted Group and segment performance, and I would like now to open the floor up for questions.

[Operator Instructions] The first question is from the line of Donati Stefano with BlackRock.

I got a couple of questions. If you can give us some update in terms of your views, in terms of the potential profitability of Concession business 2021. You're showing some interesting charts with a rebound, obviously, from very, very deep lows in the first quarter 2020. So if you can give us some sense in terms of the potential cash generation from the business 2021, assuming, say, an average year, what you think would be a fair assumption for the year there. And secondly, a topic which has always been discussed is if you can clarify the amount of support that the Restricted Group has provided to the Unrestricted Group during this first quarter.

Yes. Regarding the first question, as you see on Page 16, we have significant improvements in the last weeks. So that also is presenting in April. Actually, the last week, because this year, lockdown is much lighter, as I mentioned, it is more than doubling than the traffic that we had in the same weeks in April. So this is a significant improvement. But it's very early to see the developments. If that COVID-19 pandemic will continue or we have an additional lockdown or not, despite the fact that things are very more rosy as we speak compared to the previous year as a lot of people are in a better shape and we are expecting the open of the economy as of next Monday, gradually, which is very, very positive. So I'd like to be very cautious optimistic that the year will be in good shape compared to the previous year, but I'm cautious optimistic to be in a better shape depending on the developments of the economic activity and the lockdowns development. So I think we have a few weeks, let's say, some information. If that continues, that will be very good, but we have to see the developments before give any guidance for the full year. Now regarding the amount of support that you're mentioning, you're talking about the usage of the basket. Is that correct?

That's correct.

Yes. For the 2019, we have used EUR 76 million of baskets for the full year 2020 -- sorry, for the 2020, we have used EUR 76 million of baskets.

And any update for the current quarter? Any further support?

In Q1, we have added additional EUR 1.5 million. And also in Q2, we have an additional amount of EUR 16 million additionally. So this is where we stand as we speak.

So -- sorry, as of the end of the first quarter, you said it's like -- sorry, as of today, essentially it's like EUR 16 million plus EUR 1.5 million in 2021.

Yes.

And that leaves today what capacity in the basket as of today, including those 2...

The capacity we have as we speak today are very limited. But have in mind that we have already a capital increase approval, as Aris mentioned before. And also, we are in a process to complete a bridge financing, which, in the next few days, if not days, a few weeks, to be in place, which will support the Construction as we have already announced in our share capital increase plan.

[Operator Instructions] The next question is from the line of [indiscernible] with Boundary Creek Advisors.

Can you talk a little bit about the special dividend that Attiki Odos declared? And what are the proceeds going to go towards? And maybe you can talk a little bit about CapEx development for 2021. I guess the CapEx for the Alimos Marina is probably going to need to kick in at some point, and then I guess the CapEx for the EDP project. So can you just talk a little bit about what we should be expecting for CapEx for '21, please?

Yes. On Attiki Odos, you're mentioning about the decrease of capital that already has took place in Attiki Odos. That has been already materialized, which has been transferred the amounts to existing shareholders, which are our group and the other shareholders of the group. We own 66% of Attiki Odos. So that has been already through a decrease of capital that was allowed under the contract. Regarding the CapEx that you're mentioning that we have in place this year, the main project that we have...

I'm sorry. I'm sorry to interrupt, sorry. I didn't understand that. I saw that there was a special dividend that was declared, right? And I thought that you guys would be receiving something in the tune of like EUR 55 million. This is post December, yes? So that cash has been received and it sits in the Restricted Group?

That has been received in Restricted Group already, and that was through a capital reduction, not a special dividend.

Okay, sorry. Then the paper product [ wrong ]. Okay. And so what is the use for the cash?

The owner of that -- of this Attiki Odos is AKTOR Concessions in order to have the power for participation in projects that we have ahead of us, of AKTOR Concessions and Ellaktor in the near future. So that was the purpose to have this in place. And regarding CapEx, the main project that we have ahead of us is on the renewable. We have the AGRAFA projects. We have already -- this is something roughly EUR 100 million CapEx plan. We already spent the last year something like EUR 14 million, EUR 15 million. And the plan is to be an additional equal or slight lower that amount this year, but the main part will be on 2020 when we're expecting the completion of the projects of AGRAFA. So this is for this year and for next year on renewable energy. Regarding the -- what was the other on Concession. We have also the Marina Alimos expansion. This is a project of roughly EUR 90 million. We have already -- we are starting, and this is a 4-year project. So gradually, the development will be proceed, and we are going to have a CapEx of roughly to that amount in 4 years. So some -- between EUR 20 million, EUR 25 million are expected to be for this year for the related. I remind you that we have already in place a loan facility that has been already secured and -- from a bank in Greece, which will support this CapEx for this project.

Okay. Great. And can I just ask, in terms of concession, the tenders or participation that you guys have at the moment, what's outstanding there? I saw the Egnatia Odos didn't -- you guys didn't participate in that. So what else have you got on your list for tenders?

There are several smaller projects in place, and we have already participated by providing an offer for participating to the process, but smaller ones. The biggest ones that are done in the near future are related to the extension of Attiki Odos, but this is for end of this year or the year after to start the process. And then the North motorway of Crete, which will follow. So those are the biggest in the coming 1 or 2 years.

The next question is from the line of Memisoglu Osman with Ambrosia Capital.

On the Renewables, the last bit that's left, the 88 megawatts, is there any update on what kind of tariffs you would receive on that? And also on a separate note, if you could give us any update, any color on Marina Alimos, how it's going, any color on potential cash flows, timing, et cetera.

As for the Renewables, we are expecting the AGRAFA project to be completed in 2022. We're expecting the tariffs to be at a range of EUR 70 per megawatt. So this is what we're expecting. Regarding now Marina Alimos, we started in January 1 managing the Marina. We are in a process to rebuild the whole landscape of Marina. And actually, there's a lot of demand, as we speak, for Marina. And we see that, that will contribute positively from year 1 in our revenues and EBITDA for this year. Now it's very early to say any figure but will be some millions of euros that will be added through this -- even from the first year despite the fact that the project is 4-year project in order to rebuild, in order to have the full scale of potential of Marina Alimos.

Is that contribution to top line, some million, or to EBITDA? Or...

Let's say, between EUR 5 million to EUR 10 million will be the revenues with a profit margin of x, will be both some millions in our EBITDA but also in revenues.

The next question is from the line of Kogge Maxime with ODDO BHF.

All right. Yes. So within the concession sector, can you break down the contribution of Attiki Odos versus the other assets in the Concession division in terms of EBITDA and also in terms of net debt or net cash more precisely? And the press has reported a project to potentially divest the Environment division. I mean, is it something that you're considering or it's not planned at this stage?

On Restricted Group, as we present, the -- we fully consolidate Attiki Odos. This is the only full consolidation. And plus, there are small parking that we are having in place. But the majority by far is 99% is Attiki Odos contribution that we fully consolidate on Restricted Group. Now on Environment, the plan is to expand. That's why we have this agreement with EDPR as we have already announced, and we want -- we are expecting to grow our exposure. We are already the second largest player. And with the growth plan that we have in place, we will continue expand significantly our presence in the market, so we don't have any plans for divestments.

Yes. I was talking actually of the Waste division. Sorry if I made a mistake. Ellaktor.

In Environment, there is a segment with a huge potential. So we are the market leader in the market. So we don't intend to proceed with any divestments. On the other hand, we are in a process to expand the business further as also the segment will grow significantly as you're probably aware.

Okay. So that could take the form of the partnership similar to EDP in Renewables.

Sorry, can you repeat your question?

I mean -- so you're mentioning, you're referring to potential partnership similar to the one you have with EDP in Renewables. So that could be a way to grow the Waste division, no?

There's nothing on the table as we speak, but you cannot avoid having some issues, but there's nothing on the table as we speak.

The next question is from the line of [indiscernible] with Eaton Vance Management.

Just a few questions for me. The first one is has there been any progress on the discussions with the government on the extension of Attiki Odos? I know the lockdown might have given you some ammunition to extend the life of the concession.

Actually, the government is in a process -- probably has already hired an adviser in order to support them, in order to run the process for bids for Attiki Odos in the near future.

Sorry, just what -- to clarify, what's the [ time line ] of that?

Sorry, was the question about potential remuneration to concessionaires due to the lockdown measures? Or was it the extension of Attiki Odos?

I guess the remuneration could come via an extension or via a payment. So what's the strategy of the group right now on that matter?

Yes. So basically, it's uniform for all concessionaires, for Attiki Odos and for Moreas. We also have an insurance component associated to this remuneration that we are exploring. But I think that the extension of the concession is probably a more complex answer. I think that a cash quantum is going to be the more likely answer. And for Attiki Odos and for Moreas, we are still working through the complexity with the insurance company. For the rest, the state is going to readily provide some cash quantum.

Okay. The second question I have is on -- I know this is outside the Restricted Group, but can you provide some commentary on what the financial health of the Construction business is? And as you've done your budgeting for 2021, what is the liquidity of that business? Do you think it will oppose the equity injection? Are you comfortable at free cash flow breakeven? What's the general outlook there?

As we already communicated on the full group results, following the capital increase in Construction segment, we're expecting in the last quarter of the year to be at a breakeven of EBITDA for the last quarter and gradually to return to profitability. But this is how we are expecting the year to evolve.

Okay. And last question for me on the environmental side. How should we think about the 2021? Obviously, 2020 was very weak for that segment. I know there was some one-offs in there. What should we expect from that segment for 2021?

For 2021, it seems better than the previous year, let's say, before having the one-offs. As I mentioned before, due to the one-offs, we had an EBITDA of EUR 4 million. Without the one-offs, we're at EUR 11 million. This year, we expect to be higher than the EUR 11 million, but -- as the segment is performing and there is a lot of potential in the segment.

The next question is from the line of Gkonis Argyrios with Axia Ventures.

Quick question from my side. Given the exposure that has been accumulated on the Restricted Group for the unrestricted entity and based on the capital structuring actions that you have scheduled, is there any time plan or schedule to potentially reduce gradually the exposure of the Unrestricted -- to the Unrestricted Group, essentially return back some of the money to the Restricted Group? How should we think about that?

First, we need to stabilize the Construction segment business. And as I mentioned, we expect that to be at the end of the year, gradually that to have a working capital positive development and then to start repaying the obligation. But definitely, we're expecting gradually down the road to receive back the facilities that we have provided to the Construction, but we need to stabilize first before starting that process.

Actually, can I do a follow-up question, if I may? Regarding the wind park in AGRAFA, you mentioned that the tariff most likely will come around the 70s. Can you explain us a bit the reason behind this adjustment? I thought that the tariff initially was scheduled to be a feed-in premium tariff, which would sit closer to the 90s. Can you please elaborate a bit on that?

Yes. So all tariffs that are being locked for these types of assets have a timing component, which means that you have to connect them to the grid up until a certain deadline. And there have been a handful of extensions given. But I think that the current conservative planning given some of the operational complexity on developing those wind parks basically points us to the EUR 70 per megawatt hour mark. You are correct. Previously, it was EUR 98, but I think what seems to be the more conservative, let's say, base case for now is the EUR 70.

And the EUR 70 will still be under a feed-in premium framework? Or it will be under a market framework or something different?

No, feed-in premium. So fixed tariffs, and of course, we will enjoy all the other benefits such as priority to the grid and full guaranteed offtake.

And so it's just a discount in the actual price. Okay.

Yes.

[Operator Instructions] We have a follow-up question from the line of Memisoglu Osman with Ambrosia Capital.

Yes. Just following up on a previous question. The EBITDA of Construction you mentioned will be breakeven in Q4 only, right, not for the full year? Just wanted to clarify that.

This is the expectation.

Perfect. And I'm assuming that's going to continue to improve in 2022, right?

That is a good...

Okay. May I ask you, I mean, that seems to be slightly lower than previous guidance. Any conceptual -- roughly, what has changed?

Actually, we haven't given any guidance, but having in mind that the capital increase is starting -- will be completed by July, but we are going to have in the next few days or weeks the bridge financing. Have in mind -- this in mind, this is the latest estimate that we have for the segment.

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

Thank you for participating today. We are in your disposal to have any further discussion or questions after this call. Thank you all for participating today to this conference call.

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