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

Ladies and gentlemen, thank you for standing by. I am Mina, 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 full year 2023 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, ELLAKTOR Group; Mr. Dimos Revelas, CFO, ELLAKTOR Group; Mrs. Aphrodite Avramea, Head of Strategy; and Mr. Andreas Papanagiotopoulos, Group Treasurer and IRO. Mr. Revelas, you may now proceed.

Thank you. Good afternoon, and welcome to ELLAKTOR's conference call for the fiscal year 2023. A press release announcing ELLAKTOR's financial and operating results for the year, the consolidated financial information and the presentation were issued earlier today. They are all available on the Investors section of our website, www.ellaktor.com. On our call today, we will share with you business update and review of our financial results and our ESG performance and achievements. A Q&A session will then follow. Now please allow me to turn over the floor to Mr. Bouloutas. Efthymios?

Dimos, thank you very much. Good afternoon, everybody. Thank you very much for taking the time to participate in the conference call today. We will discuss the full year 2023 financial results of ELLAKTOR Group. And I will follow the presentation that has been uploaded in our Internet side earlier today. Turning to Page #3 of the presentation. Here, you see a business group update. On the right side, we have the transaction that led us to the left side. So I will start with the right side. As you're probably aware, we've done a series of transactions in Construction, Real Estate earlier this year on Renewable business. And we have an ongoing process on the Environment. So starting from Construction. AKTOR was sold to INTRAKAT for approximately EUR 111 million in equity and EUR 114 million in intra-group debt assumption in November 2023. EUR 18 million, the first quarterly installment, was received in February 2024 with the remaining installments standing at EUR 96 million. On the Real Estate, we've sold the operating asset of the company, the Smart Park, to TRADE ESTATES for EUR 95 million in equity in November 2023. We acquired an 85-acre Gournes land plot brought from TAIPED, which is in North Crete, an ex military base. We managed to -- sold a minority stake that we had in Athens with METROPOLITAN EXPO, 11.7% for EUR 4.4 million in equity. And we sold 2 out of 3 Romanian land properties for a price of EUR 13 million. Earlier this year, we sold the remaining 25% in Anemos RES to Motor Oil Renewable Energy for EUR 123.5 million in equity. And we've announced in the market that there is an ongoing due diligence process, which has been initiated at the HELECTOR level, our Environmental business, by Motor Oil in April 2024. Most of these transactions and the ongoing operational restructuring of the group has brought substantial viable long-term earnings stream from operations. We stand at approximately EUR 700-plus million of liquidity as of April 2024. In our results announcement, the number is EUR 521 million, but this is up until 31st of December 2023. Also, the active management of the substantial bulk cash position is generating significant interest income for year 2024. In terms of Concession business, on the Concession business, we continue with all of our concessions plus adding the Kalamata-Rizomylos concession, which is in the construction phase currently. And we will work for the majority of this year with the full number of concessions that we had last year. In terms of new concessions, we are targeting participation in concession projects with a combined value of approximately EUR 6 billion, either independently as AKTOR CONCESSIONS or through joint ventures. And on the Environmental business, we are active, again, in participation in all the new projects totaling approximately EUR 3.7 billion potential investments under the National Waste Management Plan. This National Waste Management Plan effectively follows the EU domestic compliance that drives major infrastructure developments. Out of the existing concessions, we remind the investors and the analysts that the income that is expected to be generated over the years of the contractual terms of each concession amount to cumulatively nominal EUR 1 billion. Turning now to Page #6. Here, you can see in terms of continuing operations, the financial highlights for fiscal year 2023. Again, to remind you, since we've sold AKTOR successfully at the end of 2023, this appears as discontinued operation. So in terms of revenue, we are at EUR 387 million. In terms of EBITDA, the EBITDA reached EUR 242 million, increased by 46% versus the same period of last year. If we -- the consolidated continuing operations and discontinued operation, EBITDA stands at EUR 229 million. The EBITDA margin is significantly higher at 63%. And finally, the net earnings are at EUR 116 million, net earnings after tax with a margin of 30% versus losses of EUR 3 million last year. In terms of group cash and liquid assets at the end of 2023, group cash amounted to EUR 521 million versus EUR 364 million at the end of last -- of 2022. Net cash amounts to EUR 308 million versus EUR 152 million. And the equity attributable to shareholders is close to EUR 900 million or EUR 5.57 per share, increased approximately 8% up this year from [ 239 ] at the end of 2023 to EUR 2.57 end of 2023. Finally, the operating cash flow for the year came in at positive EUR 74 million. Turning to Page #7. What you can see here is an analytical breakdown of the revenue and the EBITDA in each of the respective segments of the group, Concessions, Environment, the Real Estate, other, meaning the holding company and the discontinued operations. Again, for reference, discontinued operation for fiscal year 2023 is the Construction business, while for 2022, it is the Construction business plus the RES business that we stopped accounting for in the beginning of 2023. Looking at the numbers, you see that other than the Environment, where we have a drop of approximately EUR 22 million in terms of revenue, but the major part of this is due to a closure of Osnabruck, the German operation. All of the businesses post positive revenue delta. And in terms of EBITDA, obviously, Concession comes in at EUR 180 million, Environment at EUR 14.2 million. The Real Estate, the significant EUR 62 million based on profits out of the sale of the assets, and that amounts to -- for a total EUR 242 million. In terms of discontinued operations, the number for 2023 is minus EUR 14 million, predominantly the contribution from the AKTOR Construction business for the period of January till November 2023 that we were consolidating this business. EBITDA margin of continuing operation came in at 63% versus 41% margin for the same businesses last year. Turning now to Page #8. Here, we'll give you a business update. On Concessions, Attiki Odos traffic was up 9.5% the year 2023. And with the rest of the motorways under management were up 9.2%. So these numbers are consistent with improving economic trends in Greece and in Europe versus 2022 year that was also hit by post-COVID effects. We also secured a major 30-year road projects, the Kalamata-Rizomylos-Pylos, where we cooperate with INTRAKAT in a 60-40 joint venture. And in North Crete, this is a part of the work highway with GEK TERNA, AKTOR CONCESSIONS and INTRAKAT, the members of the JV. We also proposed jointly in May '23 for Attica's remaining road network expansion, which is called Project ATHINA I with GEK TERNA taking part in that 36%; AKTOR CONCESSIONS, 32%; and AVAX, 32%. As we discussed initially, we are active in diverse PPPs and Concession contracts and tenders, irrigation, water, buildings, dams exceeding EUR 4 billion and EUR 2.5 billion, respectively. And another issue that, of course, goes to 2024 is not including the 2023 results is after a 10-year period, we managed to collect this THERMAIKI ODOS claim, which was an EUR 85 million claim. AKTOR CONCESSIONS was part of -- 6% part of the JV. So we managed to collect EUR 42.5 million out of this claim in February 2024. On the environmental front, during 2023, we signed EUR 52 million construction and EUR 29 million O&M projects. That include the preemption right for an additional EUR 35 million of projects. We are also declared bidders as -- we are declared as preferred bidders for EUR 52 million additional projects. In December -- at the end of December, we had a backlog of EUR 75 million in Construction, EUR 36 million in O&M projects with preemption rights for additional EUR 61.5 million. So you can see the backlog on the Environmental businesses is significant. We also submit for additional projects that are yet to be awarded with a total budget of EUR 450 million. Approximately 45% of that, EUR 205 million are in Construction and EUR 242 million are in O&M. And for December 2023, we're pending the closing of EUR 12.5 million project in organic waste composite unit in Germany. In terms of Real Estate, we discussed about the strategy in Real Estate was to get rid of the operating asset and focus on development for the remaining 2 major projects, which is the Kambas and the Gournes project. Finally, on the Construction, which is discontinued operations, while we had the operation, we managed to land new contracts approximately EUR 342 million by the closing date of November 7, both in Greece and in Romania. And we've been declared bidder for EUR 362 million in projects awarded up until that point in time. And we sold the company with a backlog, a heavy backlog of EUR 2.5 billion. With that, I'd like to stop here and turn the floor over to Mr. Dimos Revelas to give you more detailed view of our results, P&L and balance sheet. Dimos?

Thank you. Moving on Page 11 and focusing on continuing operations on the left-hand side of the table that is on group activities but Construction. Revenue settled 3% lower at EUR 387 million as they increased register in Concessions, which is counterbalanced by lower sales environment as already mentioned. We will elaborate a bit further on that in a while. In terms of territorial breakdown, sales in Greece post the disposal of AKTOR accounted for 96% of total. The total cost base of continuing operations, comprising both cost of sales and other operating expenses but excluding depreciation, decreased by 12% to EUR 217 million. EBITDA for continuing operations for the period rose 46% to EUR 242 million. And this EBITDA is also inclusive of EUR 47 million capital gain registered on the sale of Smart Park. Post-tax earnings for continuing operations again amounted to EUR 116 million from margin that is [indiscernible] last year, while earnings after tax and minorities to EUR 69 million from losses of EUR 24 million a year ago. Continuing and discontinuing operations combined produced a bottom line after tax and minorities of EUR 33 million, given Construction's negative contribution. On Page 13, some key highlights on the asset side. An amount of EUR 200 million from our asset side corresponds to the net after depreciation Concession rates of Attiki Odos and Moreas. [indiscernible] with a tenor longer than 3 months at EUR 190 million, in line with increasing overall liquidity. Of the total receivables of EUR 405 million booked on the balance sheet, an amount of EUR 140 million refers to the debt receivable from INTRAKAT, EUR 61 million to advance payments to subcontractors for health and maintenance and EUR 77 million to intra-group loans, mostly sub-debt advanced to THERMAIKI ODOS and the [ GM ] motorway. On the liability side, total equity attributable to shareholders at the end of the period amounted to almost EUR 900 million or EUR 2.58 per share, with the ratio of total equity over total assets standing at 49%. Total indebtedness is down by approximately EUR 90 million mostly due to the sale of Smart Park and scheduled principal repayments in Concessions. The sale of Smart Park is referred here as Smart Park also -- was also carrying debt unit. More than 80% of total indebtedness is either on a fixed rate or hedged partially or fully. Finally, on the liability side, provisions are mostly relating to heavy maintenance. On Page 14, we provide our usual net debt breakdown, having for comparability purposes adjusted debt and cash items to reflect the current group structure. Excluding Moreas and the nonrecourse debt and the equivalent cash, we have a net cash position of EUR 308 million, while total net debt, including Moreas, stands at EUR 49 million or 0.2x EBITDA from continuing operations. Moving further down on Page 15. Operating cash flow from continuing operations amounted to EUR 74 million compared to EUR 54 million a year ago. Overall, the cash flow has been impacted by the transactions consummated during the previous year, the [ EUR 10 million, EUR 12 million ] investment outlay for Gournes as well as any scheduled repayments of term loans in AKTOR CONCESSIONS and Moreas. Let's move on to the business units and briefly discuss on their financials. So on Page 17. Concessions, I think, most of the real numbers have already been discussed. Operating profitability up by 19% to EUR 180 million. The drivers being the strong traffic performance across all assets, also coupled with improved contributions from Gefyra and THERMAIKI ODOS assets. After more than a decade, the EUR 85 million THERMAIKI ODOS claim was collected in early February '24, with AKTOR CONCESSIONS entitled to 50% of the amount that we collect. The reported EBITDA has been negatively impacted by EUR 11 million provision for employee-related termination costs at [indiscernible], which is the [indiscernible] operator, ahead of the scheduled handover of the concession. On Environment, on Page 18, the business unit had annual revenues of EUR 100 million, reduced by 18% as a result of the contraction -- cease of operations in Osnabruck, Germany and Kalamata units as well as lower selling price of recyclables, which was a trend throughout the year. All of the above only being partly offset by higher input volumes and gate fees. Mostly for the same reasons, also we pay a EUR 1.3 million asset write-off related to life cycle maintenance; and B, the full consolidation, which is a positive impact of the clinical incinerator operations. EBITDA for the period was EUR 14.2 million or minus 7% year-on-year. And on Real Estate, on Page 19, revenues, as you probably assume, correspond to an 11-month period during which Smart Park was in our ownership, in REDS' ownership, while EBITDA is also inclusive of an aggregate EUR 56 million capital gain recorded in the transactions executed within the year. In the appendix, you are also provided with additional info from the P&L by segment for the fiscal year plus segmental breakdown of the group's net debt. Let me now turn over the floor to Mrs. Aphrodite Avramea to walk us through our ESG performance and metrics. Aphrodite?

Good evening. My name is Aphrodite Avramea, and I'm the Head of Strategy at ELLAKTOR Group. In the following few minutes, I'm going to provide a brief overview of our ESG activity for 2023. Slide 21 summarizes our basic 2023 ESG KPIs and how they compare to the relevant 2022 and 2021 figures. We will focus on continuing operations. As you can see, for 1 more year, the group's contribution to the environment remains positive. Since in 2023, we managed to prevent 21x more CO2 equivalent emissions compared to the ones that we produce, while the energy produced from renewable sources exceeded total energy consumed by 80%. On the society and governance front, our Board female representation remained strong at 27%. And as in the previous years, there were no confirmed incidents of corruption or discrimination. More of 90% of our supplies were acquired from local suppliers, demonstrating the group's commitment to support local communities. Capitalizing on 2021 and 2022 achievements, 2023 was a year of further expansion of sustainable development practices within the group. In the context of Athens Stock Exchange's initiative to promote ESG reporting, we received an ESG transparency score of 95%, which is the second highest score among the rated Athens Stock Exchange's listed companies. Furthermore, during 2023, we disclosed for the first time environmental data climate change for CDP, achieving a rating of B, which is higher than the global average of C. In addition to that, we identified, assessed and disclosed the impact of climate-related factors and our financial performance in alignment with TCFD. And we committed to set near-term groupwide emission reduction targets in line with SBTi. Furthermore, we signed the Diversity Charter for Greek businesses. And we launched the new CSR initiative, Whole Living. All these efforts were [indiscernible] the vast improvement of the group's performance according to the major ESG raters. This performance in comparison to the 2 previous years is summarized in Slide 24. Finally, the following slide, revenue, OpEx and CapEx eligibility and alignment according to EU Taxonomy. In order for an activity or an investment to be characterized as taxonomy aligned, it has to meet certain environmental criteria set by the European Union related to climate change, circular economy, biodiversity, pollution prevention and water supply and waste management. In addition to that, a no significant harm check has to be performed, while the activity has to comply a minimum safeguard set by EU. In accordance with these guidelines, for 2023, our taxonomy aligned revenues stood at EUR 55 million and represented 7% of our overall turnover, while 78% or more than EUR 630 million of our revenue was eligible but not aligned according to EU Taxonomy. Now focusing on continuing operations, almost 10% of our revenue was taxonomy aligned while 74% was eligible but not aligned. As far as operating expenses are concerned, 6% of the overall operating expenses were taxonomy aligned. These expenses relate exclusively to continuing operations. And 74% of the group's total operating expenses were eligible but not aligned according to EU Taxonomy. Finally, 12% of our CapEx was related to taxonomy aligned activities, which comes exclusively from continuing operations since there were no taxonomy aligned capital expenses related to its continuing operations. 42% of CapEx was eligible but not aligned according to EU Taxonomy. So this was a brief overview of our ESG footprint. I will now hand over to the presentation to Mr. Dimos Revelas for -- the Group CFO for closing remarks.

Thank you, Aphrodite. I think we can have -- we can take any questions you might have. So at your disposal.

[Operator Instructions] The first question is from the line of [ Carlis Constantinos ] with Euroxx Securities.

Two questions. One, if it is possible to provide the road map regarding the future of HELECTOR? Second, as there is ample liquidity on your balance sheet, it makes logical the question that share capital return is imminent. Can you elaborate on this? Can we expect something from this side?

We're starting -- thank you very much for the question. Starting from your second question, we cannot -- at this point in time, the Board has not taken any decision regarding capital returns. We have planned our Annual General Assembly for the 31st of May. And prior to that, what we have communicated in our economic calendar is that the Board will convene. And we will decide whether to propose a capital return for the shareholders. So up until the Board's meeting, the decision of the Board, we'll not say anything more specific. In terms of HELECTOR, as we have disclosed to the market, we are in the process of due diligence. And we confirm that we have not received, yes, financial offer or any offer. So up until that point, again, we cannot comment on that. We expect that within the next couple of months, we will -- once we have any offer, we will proceed with a Board to discuss the offer and come back with an official answer.

[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. Ladies and gentlemen, thank you very much for your time, the participation and the questions. This has been a phenomenal year for ELLAKTOR. And in terms of profitability, we closed the year with EUR 116 million, which is the maximum that this group has ever posted. So we are excited about the results, and I hope you are as well. Thank you very much for your participation, and have a good afternoon.

Ladies and gentlemen, there are no further questions at this time. The conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant afternoon.