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

Ladies and gentlemen, thank you for standing by. I'm Constantino, 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 first quarter 2021 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. Efthymios Bouloutas, CEO of ELLAKTOR Group; Mr. George Poulopoulos, CFO of ELLAKTOR Group; and Mr. Dimitrios Koutsoukos, Director of Business Planning and Investor Relations. Mr. Bouloutas, you may now proceed.

Thank you very much. Good afternoon, ladies and gentlemen, and good morning to our colleagues joining in from the U.S. My name Efthymios Bouloutas, I'm the Group CEO. And joining me today are ELLAKTOR Group CFO, Mr. George Poulopoulos; Investor Relations Director, Mr. Dimitrios Koutsoukos. Thank you all for dialing into ELLAKTOR Restricted Group for Q1 2021 Financial Results Call. And it's my pleasure to be speaking to you today as the newly appointed CEO of ELLAKTOR Group following the completion of my predecessor, Mr. Aris Xenofos', successful tenure. Having concluded the approval of the Board of Directors proposed share capital increase, which was critically important for the group, ELLAKTOR is now turning page towards the growth. This EUR 120.5 million share capital increase fortifies Construction balance sheet and liquidity position and will enable ELLAKTOR to pursue its growth strategy and investment plan in the macroeconomic context, which is characterized by strong tailwinds for all group business units. Out of the total proceeds of EUR 120 million, as we have already disclosed, EUR 100 million is earmarked for ELLAKTOR and will be used to solve the liquidity issues, restore the business competitiveness and stabilize its performance. The balance of approximately EUR 20 million will be directed towards our Renewables business and will finance its investment program. Recognizing the pressing nature of Construction's liquidity constraints, ELLAKTOR successfully completed the issuance of a EUR 50 million bond loan with Eurobank, a domestic bank, as arranged, and as an interim financing solution. This bond will be repaid by the proceeds of the share capital increase and participating bondholder, Reggeborgh Invest, Optima bank, Eurobank and National Bank of Greece. Looking at the first Q 2021 performance, ELLAKTOR's Restricted Group has proven very resilient despite the fact that the ongoing pandemic has significantly impacted our Concession business. On the other hand, our Renewables business posted very strong performance growing in both revenue and EBITDA terms, unaffected by the pandemic, while the environment was also a positive contributor to the EBITDA. Looking at headline group results. Group EBITDA stood at EUR 50 million for the first Q 2021, only marginally lower vis-a-vis last year, same period, posting a reduction of 1%. Restricted Group and cash and other liquid assets stood at EUR 304 million on the end of March of 2021, improving compared with EUR 298 million at the end of the year. Net debt stood at EUR 727 million compared with EUR 736 million at the end of the year. EBITDA in the Concession business came in at EUR 20 million compared with EUR 31 million same period of last year, down 35% due to the restrictive measures of the lockdown. Indicatively, Attiki Odos vehicle traffic for the first Q decreased by 28% vis-a-vis last year. In Renewables, EBITDA grew to EUR 28 million compared to EUR 20 million for 2019, up -- 2020, I'm sorry, up by 40% as a result of the increased installed capacity, which stands at 493 megawatts today. Environment EBITDA stood at EUR 4 million, up by 6% vis-a-vis last year. Despite the challenging start of the year, there's a lot to look forward to in 2021, particularly as ELLAKTOR Restricted Group once again proves the resilience and predictability of performance of its portfolio. The priorities for the management for 2021 includes the restoration of competitiveness, stabilization of the performance of the Construction and acceleration of group's restructuring plan, enhancement of internal controls, procurement optimization as well as the conclusion of the proposed share capital increase addressing the liquidity needs predominantly in the construction sector. This will enable the group to leverage the decades' worth of expertise it has built and consolidate its leading position with sectors that will significantly benefit from EU and state funds that will be funneled to grow the Greek economy. Now I would like to hand over to George to run you through our Restricted Group's Q1 financial performance in greater detail. George?

Thank you, Efthymios, 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 segments and Moreas S.A. During the periods presented, the Restricted Group functions as part of the larger group of companies controlled by ELLAKTOR. Also, the financial information of the Restricted Group is presented prior to elimination and risk related to investments in subsidiaries and intercompany loans, liability 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 the preparation of the annual financial statements for the year ended 31st of December 2020. Following that introduction, I would like now to present ELLAKTOR's first quarter results by following some slides from our Q1 2021 Restricted Group results presentation. On Page 3, we have the Restricted Group consolidated P&L. Restricted Group revenues increased to EUR 93.4 million or plus 3% due to increases in RES at EUR 32.4 million versus EUR 23.9 million a year ago, and Environment at EUR 24 million versus EUR 22 million a year ago while decreasing Concessions by EUR 37 million versus EUR 45 million a year ago. Restricted Group EBITDA decreased marginally to EUR 50 million, EUR 49.8 million specifically, versus EUR 50.1 million, mainly due to reduction in Concessions EBITDA to EUR 20 million versus EUR 31 million in Q1 '20, which was offset by strong performance in RES at EUR 27.6 million versus EUR 19.8 million in Q1 '20. Turning on Page 7. We see the evolution of the key P&L items year-on-year. Restricted Group net revenue stood at EUR 93 million compared to EUR 91 million in Q1 '20, posting an increase of EUR 2.6 million. The year-on-year decrease of EUR 8 million in Concessions was offset by increases to revenues of EUR 9 million in Renewables and EUR 2 million in the Environment. EBITDA margin stood at 53% in Q1 '21 versus 55% in Q1 '20. Net profit, excluding the share of loss from the Unrestricted Group stood at EUR 15 million versus EUR 10 million in Q1 '20, posting an increase of 49%. On Page 9, total assets stood at EUR 1.785 billion as of March 31, '21, versus EUR 1.703 billion at the year-end 2020, recording a delta of plus 5%. This increase is driven mainly by the recognition of the right to use, operate and manage the Alimos Marina. Equity attributable to shareholders was at EUR 225 million versus EUR 230 million at the end of 2020 due to the negative results of the Unrestricted Group. On Page 10, you can see an analysis of net debt by segment. On Slide 9, you see that net debt as at 31st of March '21 stood at EUR 727 million versus EUR 736 million at the end of December 2020. On Page 11, we present the cash and liquid assets, which stood at EUR 304 million versus EUR 298 million at the end of 2020. On this page, we also present the quarterly cash flows. Operating cash inflows amounted to EUR 16 million versus EUR 20 million in Q1 '20. Investment cash inflows amounted to EUR 11 million in Q1 versus outflows of EUR 44 million in Q1 '20. Cash outflows from financial activities reached EUR 18 million in Q1 '21 versus inflows of EUR 42 million in the respective quarter in 2020. Now let me go through the segmental analysis of Q1 '21. On Page 13, we have the Concessions highlights. Revenues stood at EUR 37 million in Q1 '21 versus EUR 45 million in Q1 '20. The decrease of revenues in Q1 '21 is due to the decrease in traffic at Attiki Odos by 28% as a result of restrictions in movements and lockdown measures imposed by the state in response to the COVID-19 pandemic. However, we are seeing an improvement in traffic, as you can see on the bottom left-hand side corner with the red color. Year-to-date, the decrease is only marginally at just 0.1% year-on-year and the expectation is that this improvement trend will continue. Concessions EBITDA amounted to EUR 20 million in Q1 '20 versus EUR 31 million in Q1 '20, marking a decrease by 35%. On Page 14, we present the renewal lender resources highlights. Revenues stood at EUR 32 million in Q1 '21 versus EUR 24 million in Q1 '20, an increase of 36% year-on-year due to increased installed capacity to 493 megawatts. As we have indicated, the growth plan of our Renewable business is underpinned by the strategic agreement with EDPR. In this context, there are licenses of strong capacity up to 496 megawatts that are at early stages of development. EBITDA stood at EUR 28 million in Q1 '21 versus EUR 20 million in Q1 '20 and is therefore up by 47% year-on-year due to the increased installed capacity, as I mentioned earlier. On Page 15, we have the Environment segment highlights. Revenues stood at EUR 25 million in Q1 '21, up from EUR 22 million in Q1 '20 or plus 9% year-on-year due to the increased completion rate of construction projects. Q1 '21 EBITDA stood at EUR 4.3 million in Q1 '21, marking a 6% improvement versus Q1 '20. This concludes my presentation of group and segment performance of the Restricted Group. 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.

A couple of questions, if I may. Can you give us a picture -- any update following the new project you mentioned on the Construction side in terms of expected cash flows for the cash -- for the Construction side for the year? Is there any change or any direction? Any guidance you can give us or any update on that side? And secondly, on the Concessions, we see a chart showing a pickup in traffic. I assume this current data now to end of May confirm essentially leverage or close to or very close 2019 level in term of traffic. Is it a fair sense? Is it something we should expect for the rest of the year obviously bearing no further lockdowns?

On your second question, I mean we cannot forecast the pandemic evolution. So provided that we don't have any further lockdowns or restrictive measures imposed by the government, it looks like there is a healthy pickup in traffic. So for the first question, I will refer to Mr. George Poulopoulos.

Yes. Regarding the cash flow, as we have presented on the recent presentation related to the capital increase, we have incorporated all elements and we haven't seen any surprises following that presentation. So we don't see any new data to present it except what we have already presented to you a few -- a month ago with the capital raise presentation.

And then maybe just a confirmation. Since last time we spoke, any confirmation you can give us to the number of cash support from the Restricted Group into Unrestricted Group as of today?

Yes. During Q1, as we have communicated, we have supported by EUR 1.5 million. In Q2, we have supported with an additional EUR 16 million.

[Operator Instructions] The next question is from the line of Kogge, Maxime with ODDO BHF.

A few questions on my side. Can you go through the recent changes in management and CEO and give us the rationale because there was 2 successive changes in the past months since the new Board of Directors was appointed. Second question is about the Construction loss. I mean is it due to subdued sales, the fact that sales were not sufficient to absorb fixed cost? Or is it due to specific issues on some projects? And do you still confirm you're going to be back in positive EBITDA for the division in Q4 this year? Can we expect actually to see some loans in Restricted Group being repaid with the capital increase? And related to that, do you -- what's the potential level of support you will provide to the Unrestricted Group in Q3? Or should we rather expect these loans to be paid out actually?

Okay. On your first question, actually, there's 1 change -- sorry, 2 changes. Mr. Xenofos came in as the new CEO with the new management with a clear mandate for 4 months to effectively go through the motions of approval of the share capital increase and laying out the refinancing part of the group that took place with a EUR 50 million bond loan. Now we are entering an execution phase, so we had a change in the management. However, Mr. Xenofos is with us. He's the Vice Chairman of the group, nonexecutive, and he's taking a different role. So for the second question, George?

So if you go on Page 5 of the presentation, we have the results on Concession. Your question was about the Concession results, correct?

No. About the Construction loss. The EBITDA loss of around EUR 10 million this quarter, I could see that sales were down quite significantly so I wondered if the EBITDA loss was attributable to these lower sales? Or was it due to specific issues on some projects in Greece or overseas?

No. Due to the liquidity constraints that we had, especially in Q1. As we have already communicated, that was some extension of projects to be completed or on the progress. So that has created an additional losses -- expenses and that was related to that. As we have communicated, we are working in order to have an almost breakeven in Q4 this year. And this is already as well -- this is our target for this year, and this is what we see as we speak.

Okay. And regarding the potential further support of the Restricted Group to the Unrestricted Group as from Q3 or conversely a potential repayment of loans granted by the Restricted to the Unrestricted perimeter, what can you say about that? I mean after the capital increase?

As we have communicated and Mr. Bouloutas is mentioning, a bridge finance has been already in place. So this is up to EUR 50 million. And I remind you that out of the EUR 120 million of capital raise, EUR 100 million will go to the Construction sector. EUR 50 million will be repaid bridge loans and then will remain. So we don't see any additional funding needs. On the contrary, we see that, that is also we have put in place a cushion. Before starting to repay any loans to the group, we need to see this stabilization of the performance before having the first repayment of the loan facilities to the group.

Okay. So for H2, basically, you are expecting no flows from or to the Unrestricted perimeter?

Correct. This is the expectation.

The next question is from the line -- it's a follow-up question from the line of Donati, Stefano with BlackRock.

Yes. Do you have any update in the conversation with insurance coverage for the impact of lockdown? Is it too early?

Well, I think it's too early because we have some -- we've done a strategic plan, but I don't think there is any specific information that we can disclose at this particular point in time.

Mr. Donati, have you finished with your questions?

Yes. Yes, please. Maybe when you -- is there any timing in terms of that? Or can you give us some guidance?

So yes. Well, this relates to reaction by the Greek state. So given that you don't have the same individual, it might take a while. Within the rest of the year, I believe we'll have some update to give you.

[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.

Well, we don't have anything further to add. And we would like to thank all the participants in this call. Have a good afternoon.

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