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

And ladies and gentlemen, thank you for standing by. I'm Costantino, your Chorus Call operator. Welcome, and thank you for joining the Ellaktor Group conference call and live webcast to present and discuss the Ellaktor Group's first half 2023 results. [Operator Instructions] The conference is being recorded. The presentation will be followed by a question-and-answer session for institutional investors and analysts via audio conference. Please refer to invitation received, if you wish to connect to the audio conference for your questions. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Efthymios Bouloutas, CEO of Ellaktor Group; Mr. Dimos Revelas, CFO, Ellaktor SA; Ms. Aphrodite Avramea, Head of Strategy; and Mr. Andreas Papanagiotopoulos, Group Treasurer and Finance Manager. Mr. Revelas, you may now proceed.

Thank you. Good afternoon, and welcome to Ellaktor's conference call regarding our first half 2023 results. The press release announcing Ellaktor's financial and operating results for H1, the consolidated financial information and the presentation were issued on Friday. They are all available on the Investors section of our website, www.ellaktor.com. On our call today, we will share with you the business update and review of our financial results, which will be then followed by a Q&A session. Allow me now to turn over the floor to Mr. Bouloutas.

Thank you, Dimos. Good afternoon, ladies and gentlemen. Thank you very much for your participation in Ellaktor's first half 2023 financial results overview. We will follow the presentation that has been uploaded in our website on Friday. So if you can turn to Page #3. We will give you a brief group business update, followed by business update financial highlights and business update of the individual units. So as you probably know, on March 30 in 2023, Ellaktor AKTOR Concessions and INTRAKAT signed an agreement for the sale and purchase of all shares in AKTOR S.A, which is our construction -- our construction subsidiary. The completion of this transaction is pending clearance from the Hellenic Competition Committee, which has initiated the Stage B process on August 30, 2023. Stage 2 is in -- investigation is an in-depth analysis of the merger's effect on competition and typically involves more extensive information gathering, extensive economic data and detail questionnaires to various market participants. We have been through the questionnaire phase, and we expect that this deal will close in -- during the fall. So we expect we will do the financial closing by the end of the year. On a different development on September 9, REDS our real estate subsidiary has announced that they are in advanced exclusive negotiations with Trade Estates, a real estate investment company, which belongs to Fourlis Group for the likely sale of its fully owned subsidiary, Gyalou Emporiki, the owner of the Smart Park retail park. So based on all this in compliance with IFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations, we are showing the results of Ellaktor Group for the first half of 2023 are reported separately as continuing operations [ C.O ] the group will operate following the sale of AKTOR and discontinued operations, which includes AKTOR results until June 30, 2023 and the renewable energy activity results until the end of last year. The book values of assets and liabilities for all companies in Construction segment and Gyalou Emporiki were classified as held for sale as of 30th of June of 2023. Turning now to Page #6 and 7, we present the financial highlights. In 6, we have bullet points. And in 7, we have the complete tabulation of our financial results. So I'm going to refer in both those pages concurrently. So our first half continuing operation revenue came in at EUR 186 million, approximately steady for the full year of the continuing operations. The continuing operation EBITDA came in at EUR 94.2 million versus EUR 73 million with -- registering an increase of almost 29%, predominantly coming from concessions and real estate. We will discuss about that in a minute. Our continuing operation first half '23, pretax profit came in at EUR 46.3 million versus EUR 11.5 million last year. And the net income was EUR 32.1 million versus practically breakeven for the same period of 2022. The net cash of the group amounts to EUR 180 million versus net cash of approximately EUR 150 million at the end of the previous year. The equity attributable to shareholders is at EUR 840 million, while our operating cash flow for the first half of this year is EUR 87 million compared to approximately EUR 66 million during the same period of last year. If we now turn to the tabular form of our results depicted in Page #7. Here, you see that in terms of revenue increase, we are registering a healthy increase on the first half of this year. And we are also showing the results on a 12-month trailing basis. So you can see the key underlying annual trends. Key differences in underlying trends is Concessions up 7% due to increased traffic. And also Real Estate, up 18% due to an increase of both traffic in the malls, but also inflation adjusted revenue and rent increases. In terms of EBITDA, Concession came in with a 24% increase EUR 85 million versus EUR 69 million of last year. While the Real Estate -- in Real Estate, we have EUR 8.6 million versus EUR 27 million. Both of these results are organic and inorganic. In Concessions, last year, I remind you that we took an exceptional charge of almost EUR 9 million for the snowstorm Elpis. That included the compensation to drivers that we were effectively stranded in Attiki Odos for less than 12 hours. So if you take that out, then you see the underlying trend is approximately same to the traffic trend. While in Real Estate, we booked an exceptional profit due to the sale of 2 Romanian assets, we will come back in a second. All in all, in our Continuing Operation on an EBITDA level, on a revenue level, we are up 4%. And on an EBITDA level, we had a very healthy 13% increase. Moving on to Page #8 and 9. Here, we present business updates of the segments of Construction, Concession, Environment and Real Estate that are the key subsidiaries of Ellaktor Group. So on the Construction front, as of June 30, the AKTOR backlog was EUR 2.2 billion, with EUR 263 million projects signed during the first half of this year that include Rizomylos-Kalamata highway, Hersonisos-Neapoli part of the North Crete Highway BOAK, which accounts to EUR 49 million for our share. And the Panathinaikos stadium of EUR 29 million. Again, this is our share. This is a consortium of all construction companies in Greece. An additional EUR 20 million have been signed post the first half of this year. And taken together, AKTOR and subsidiaries have been declared preferred bidders for project valued at approximately EUR 400 million, bringing the current backlog to EUR 2.6 billion. AKTOR is actively participating in competitive bidding processes for many projects in Greece, the total values which are EUR 12 billion in various stages of procurement. On the Concession front, traffic for Attiki Odos was up approximately 12% year-on-year for the first half and 10% higher compared to the pre-COVID levels of the first half of 2019. Attiki Odos company jointly owned by AKTOR Concession and INTRAKAT with 60-40 participation signed, the 30-year PPP for the construction operation, maintenance of Southwest Peloponnese road access in April -- end of April of 2023. The partnership of GEK TERNA 55% AKTOR Concession 20%, INTRAKAT 25%, signed a 30-year PPP for the Hersonisos-Neapoli part of the North Crete Highway. This happened again in April 2023. We have submitted a bit as a consortium with Mytilineos, 50-50. It's a binding offer for the construction operation maintenance of a concession of the Chania-Heraklion part of the North Crete Highway on May 8, 2023. This bid has been challenged by one of the participants, and it's going to go through a court phase, but we believe that the bids will be opened at the end of October of 2023. Finally, GEK Terna, AKTOR Concessions and AVAX submitted an unsolicited proposal called ATHINA which includes extension of Attica's road network towards Lavrio, Rafina and Vouliagmenis Avenue. Turning on to our Environmental segment. We've signed a joint venture with Watt 50-50 for the contract of operation, maintenance and literate capacity increase in western Attica in the greater waste manager facility. This is a construction budget of EUR 17 million with a 4-year operation budget of EUR 24 million and preemption right for another EUR 33 million for extra 4 years. We signed a EUR 3 million contract for the sanitary landfill site and composing unit in Milos in the island of Milos. Together with AKTOR, HELECTOR has done a joint venture and declares preferred bidders for an EUR 82 million contract procured by Republic Power Corporation for 65-megawatt ton hours, natural gas-fired cogeneration plant in Kozani. Another project that has been led by HELECTOR is the waste management processing unit for Hersonissos, Crete. The construction budget is EUR 21.5 million, and the operation budget is EUR 12 million for 3 years with a preemption rise of another EUR 12 million for an extra 3 years. And ELLAKTOR is participating again in various several new tenders, which have the potential to increase both the Construction backlog and more importantly, the revenues from operations. Finally, on the Real Estate front, financial closing of the Gournes, the 350 square meters plot in Northern Crete has been completed in February 2023. We sold 2 plots of land in Romania for a total consideration of EUR 13 million, booking a profit of EUR 5.8 million in April and May 2023. And the trends that we are experiencing in Smart Park have a very positive momentum with the footfall higher by 21% and tenants' retail sales rising by 27% year-on-year for the first half this year. And finally, as we said, REDS is in exclusive advanced negotiation with Trade Estates for a likely sale of the Smart Parks, which remain operating assets. I'm going to stop here and give the floor over to Dimos to give you more color and depth in our financial results. So Dimos?

Thank you. Switching to Slide #12 and focusing on continuing operations. That is all group activities, but Construction. Revenues were flattish at EUR 186 million as the increase registered in Concessions and Real Estate were counterbalanced by lower sales in Environment, mainly due to base effects on which we will comment further down the presentation. In terms of territorial breakdown, sales increase accounted for 95% of revenues from Continuing Operations. The total cost base of Continuing Operations comprising both cost of sales and other operating expenses, but excluding depreciation, decreased by 7% to EUR 103 million. And as a result of the 2 above, Continuing Operations EBITDA for the period rose 29% to EUR 94 million and the respective margin [ saved ] at 51%, higher by 12 percentage points compared to last year, the same period of last year. Finally, post-tax earnings amounted to EUR 32 million from breakeven position last year and earnings after tax and after minorities to EUR 18 million from losses of EUR 8 million a year ago. I'm repeating earnings of EUR 18 million compared to losses of EUR 8 million. On Page 15, total equity attributable to shareholders at the end of the period amounted to EUR 840 million, that is EUR 2.41 per share, with the ratio of total equity over total assets standing at 33%. The total indebtedness amounted to EUR 597 million, of which an amount of almost EUR 400 million, EUR 397 million to be precise corresponds to Moreas. Total indebtedness is lower by some EUR 95 million compared to December 31, and this is mainly driven by the classification of Construction and Smart Park as held for sale. More than 80% of our total indebtedness is either on a fixed rate or hedged partially or fully. Moving on to Page 16. We provide on this slide our usual net debt breakdown having for comparability purposes, adjusted debt and cash items as of December 31 to reflect Construction and Smart Park as held for sale. Excluding Moreas, we have a net cash position of EUR 180 million. While total net debt, including Moreas stands at EUR 184 million. That is a onetime 12-month trailing EBITDA from continuing operations. On Page 17, a couple of points on the drivers of cash flow for the period. Operating cash flows, as already said, from continuing operations amounted to EUR 87 million compared to EUR 67 million a year ago. The most significant investment outlay of the period was an amount of EUR 21 million for the acquisition of Gournes, while we also had an inflow of EUR 13 million from the sale of 2 properties in Romania. Net flows from financing activities are [ safely ] linked to the refinancing of Smart Park at the beginning of year in February as well as scheduled repayments of term loans in AKTOR Concessions and Moreas. A couple of additional points on -- for the business units. Moving on to Page 19 and for Construction, first half '23 revenues at EUR 255 million. That is a 6% year-on-year increase, and this is driven by new Greek projects and accelerated progress in the Centura projects in Romania, domestic activities account for 68% of revenues and 57% of backlog. Losses of almost EUR 10 million were registered at the EBITDA level due to the old loss-making projects in Greece and Romania. We continue to have a positive and benign macro environment with public investments underpinned by an ambitious plan to be funded both by domestic and EU funds, creating thus significant opportunities for infrastructure projects, but personnel shortage remains a concern. Material price increases are slowing down, but industry challenges persist particularly regarding the progress of existing projects. And this is why legislative intervention, such as the price revisions is a must, so as to act as a hedge for likely overruns compared to initial budgets. On the Concessions front on Page 20, we registered and improved -- particularly improved operating profitability with EBITDA up 25% -- 24% year-on-year. This is driven by strong traffic performance across all assets, especially so for Attiki Odos. On Environment, turnover for the period for the first half of 2023 has dropped by 11% to EUR 50 million, and this is being the result of, on one hand, increased input volumes and gate fees. This is adding almost EUR 1.5 million. The full consolidation of the clinical incinerator activities, another approximately EUR 1 million -- an additional EUR 1 million. And on the other side, on the minuses, the suspension of operations of the Osnabruck facility. This is the most important item, minus EUR 4 million and the lower prices of recyclables compared to the inflated 2022 levels. This is another minus EUR 3.5 million. Finally, slightly reduced Construction activity also takes out some EUR 1 million. Overall, EBITDA for the period was EUR 6.1 million, reflecting a 14% year-on-year decrease, partly attributable to a EUR 1.2 million asset write-off related to life cycle maintenance. Of course, if we were to exclude this item, our EBITDA position would be slightly higher by 2.5%. EBIT and pre-tax profits rose by 1% and 5% year-on-year, respectively, thanks to lower depreciation charges and better financial items. I think we've covered most of what we had to say in Real Estate. Revenue is up 15%. This is purely truly organic. And the EBITDA boosted or flattered, if you want, by the EUR 5.8 million gain recorded on the sale of our 2 assets in Romania. The next slides of the presentation highlight our ESG initiatives and performance which have been already presented in our respective presentation for fiscal year 2022. For full disclosure and more details on the subject, you can refer to our 2022 sustainability report, which has been recently published and is available on our website. Finally, in the appendix we are also provided with additional information on P&L by segment for the period and segmental breakdown of the group's net debt as we always -- as we usually do. This concludes our presentation. I would now like to open the floor for any questions you may have.

[Operator Instructions]. The first question is from the line of Athanasios Nikos with Eurobank Equities.

I have a couple of questions, if I may. The first one is regarding recurring EBITDA, excluding Attiki Odos. Can you please tell us what was that like for the half year? And how does it compared to 2022? And my second question is do you expect to make more disposal -- asset disposals in the second half or in 2024? Or after AKTOR, this is the last major asset that should be disposed?

Okay. Let me take the first part of the first question, actually. We don't have half 1 figures for Attiki Odos. But for ease of reference, please be reminded that Attiki Odos is an asset yielding approximately EUR 150 million per annum. So you can assume or calculate.

Now on the second question, we're continuously evaluating the portfolio of our subsidiaries. We don't anticipate any further sales on the second half of this year. We are very focused on the disposal of AKTOR, and we are working towards the potential disposal of Smart Park.

[Operator Instructions]. The next question is from the line of Zouzoulas Constantinos with Axia Ventures.

Any update about Alimos Marina? And what about the timetable for this assets?

Well, in Alimos Marina, we have an investment plan, and we are expecting the joint ministerial decision because 3 different ministers need to approve it. We had a positive council -- municipal council decision. So hopefully, in the next, I would say, 2 to 3 months, we expect the joint ministerial decision after which we will employ -- we will go to the design and construction phase. So 6 months after the joint ministerial decision, you would expect that we're going to have the project up and running in full effect.

[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 very much. As discussed, I think we're coming closer to a point where -- as we continue our investment process in various infrastructure projects in Greece, we are coming closer to a point where the investor patience in ELLAKTOR will be rewarded. So hopefully, next year, we will be able to distribute some of our increasing cash position to our shareholders. We're not in a position to say details yet, but we will do so in our next conference call. So, thank you very much and have a good evening.

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