Ferrovial N.V. (FER) Earnings Call Transcript & Summary

Good afternoon, everybody, and welcome to Ferrovial's conference call to discuss the financial results for the first half of 2021. And just as a reminder, both the results report and presentation are available to you on our website. As in previous results, and although some restrictions to mobility have been lifted during the first half of 2021, we would like to highlight the financial information included in our report has been impacted by the COVID-19 outbreak, mainly since the second half of March 2020. Given the uncertainty regarding the speed and the extent of resumption in activity, it is not possible to predict how the health crisis will affect Ferrovial's group information and performance for 2021. Ferrovial will continue to closely monitor trading conditions and further evidence of wider economic impacts. I am joined here today by Ernesto Lopez Mozo, our CFO; and the CFOs of our business units. [Operator Instructions] With this, I will hand over to Mr. Lopez Mozo. Ernesto, the floor is yours.

Thank you, Begoa, and welcome, everybody, to the first half results conference call. Well, starting with the highlights. I would like to start with the Texas Managed Lanes where we have seen in June traffic already above June 2019 for the NTE, up 6.4%, and NTE 35 West up 19.4%. LBJ is still short of those pre-pandemic levels in terms of traffic, 13.6%. And we have to remind you that the numbers you'll see, May was impacted by weather conditions, but the traffic performance is strong. But more important, there is a strong revenue per transaction growth in all the managed lanes. And we are seeing this growth in revenues from the higher toll rates and the better mix in terms of higher proportion of heavy vehicles. Also, we got EUR 48 million in dividends from NTE and LBJ. In the 407, we have seen a lot of restrictions really with stay-at-home orders until June 2, but traffic has really been improving since the reopening. And in the last 7 days, the rolling performance was 32% drop vis-a-vis 2019. This is July '20 numbers. We are now in July in step 3 of the phase reopening, we'll see more on that in the presentation. In the I-77, we also saw a strong recovery in the second quarter and the traffic is already at pre-COVID levels, if will take February 2020 as pre-COVID. So by year end, we were achieving these numbers. I would like to say that it's not only traffic, but I will stress the revenue performance that reflects the possibility of change in tariffs and really taking benefit of a strong economic recovery or even inflation tailwind in our assets. If we move into airports, the main highlights, well Heathrow published yesterday. Also some days before Heat updated the investor report with an estimated traffic for the year of 21.5 million passengers as the base case. Of course, it provided a range of office scenarios where stress case reached 13 million passengers. In light of this, let's say, volatility of expectations, Heathrow has launched a preemptive waiver of the group interest coverage ratio covenant for 2021 at the Heathrow Finance level they're holding above Heathrow. In AGS, our refinancing was completed. We call it e Amend & Extend and the debt maturity is now June 2024. In contracting, we've seen a strong performance. Construction reached 2.4% EBIT margin. This is excluding the impact of divestments. And I would like to underscore the strong performance at Budimex. Also the sale of noncore assets in construction is finished or on track and with a very positive cash flow impact around EUR 350 million in the first half. So the main one was the divestment of the real estate business in Poland, also URBICSA in Spain. And we have other transactions that have been closed in July or are expecting closure in the coming days or weeks. I mean one of them is Nalanda that closed in July. And we also have Figueras and the recycled aggregates at Webber SCC that is pending final authorization, the same as Figueras. So all this should happen, let's say, in the third quarter. In terms of services, we have solid operating performance across the board and also strong cash flow generation. There was an agreement reached for the sale of the environmental services in Spain and Portugal for a enterprise value of EUR 1.133 billion. We just announced that before market opening today. So this is part of the business in Spain, more on that later on the presentation. So after all this first half, we have a strong financial situation with a net cash position ex-infrastructure of EUR 1.859 billion and a total liquidity ex-infrastructure of EUR 6.5 billion. So we move into the operations and starting with the toll roads. We see that there were very strong growth vis-a-vis last year. As I mentioned in the opening, I mean, the restrictions have been lifted in the U.S. and also toll rates in the managed lanes have been raised and also helped by a higher proportion of heavy vehicles. The U.S. has a strong presence in these numbers. I mean, 77% of toll road revenues and 92% of the EBITDA. We have assets under development that will come into, let's say, operation in the coming months or years, I would like to highlight the NTE 35 West Segment 3C. I mean you'll see in a minute, the performance of this road of the other segments A and B that go for a stretch of around 10 miles. This project will add 6.7 miles, it's a 66% addition of a concession that ends in 2021. We are aiming to open at the end of 2023 with a pending investment of EUR 23 million. I mean you'll see the importance of this asset, given that the catchment area is very similar to the one of the previous 2 segments. So this project should add a lot of value. Also a very important one is A66 that is longer. It's 35 kilometers, 50-year concession. Construction is expected to finish at the end of 2022, 70% is complete. And this project, that is a big one, is the one that is driving most of the cash outflow in investment this year, in particular, in the first half EUR 150 million were invested in this project. We still have a little bit more than 450 pending. And then we show others that are advancing well. Some of them are quite near completion. You can see all the data there. And Ruta de Cacao in Colombia's traffic risk, the other 3 are availabilities, right? So we can move to discuss more of the managed lanes in the next slide. Here, we see the traffic performance that I was mentioning in the opening. Of course, you have a big trough in February with the winter storm and also you had heavy rains in May. I think that it was something like 60% higher, let's say, rainfall than in the previous year, and that affected traffic. But if we look into the end of the period, I mean, in June, as I mentioned in the opening, you can see traffic above 2019 levels prepandemic. Note yet in the LBJ, but also the LBJ is kind of slowly catching up. Okay. So we move to the next one. Here, we can see a very important message. And as I mentioned, traffic is recovering, is at prepandemic almost or pandemic levels, but look at the revenue performance. I mean, this shows that there is this capacity to change tariffs and adapt to the demand, optimize the revenue flow and the value of the assets, right? So if we move on to the next slide, we can see also very interesting patterns emerging. And here, we compare in gray is the first quarter of 2021. In yellow, we see June 2021, and we have, in a kind of blue between blue and gray, we have pre-COVID graph that refers to June 2021. So we can see some emerging partners that are quite interesting. We look into NTE 35W and NTE. Of course, the afternoon traffic is clearly the peak, is the higher. But we see that -- I mean there's quite a spread in terms of traffic distribution. We see that the mid-day is clearly above pre-pandemic levels. And I would say that it is quite flat along the day in both assets. And as the economy grows, we could probably see more of this. So peaks are spreading and traffic is clearly on an excellent performance. If on top of that, we had the ability to change prices and inflation as a tailwind, you can see the -- I mean, the prospects of these assets is excellent. Also, we have the I-77, where we can see that kind of pattern very similar. So mid-days is really performing well. And LBJ has some catch-up to do yet, but still we can see some similar patterns emerging. So peaks are spreading, overall level of traffic is going to be quite interesting along the day. And this is a reflection of more logistics and commercial travel and also people taking use of flexibility maybe work from home or sort of changing patterns, but they are moving. I mean they are just choosing to do that in a more varied way. Okay. So if we move into the next slide, we can see the more specific data where we see the growth in transactions in NTE, LBJ and 35 West, the growth in revenues ahead of that and of EBITDA even higher. So you see the kind of margins that this is achieving. The traffic performance, really strong activity since the reopening in March 10 with heavy vehicles showing more resilience and a good example of the kind of traffic levels we have is that we are achieving, or I mean, running into mandatory mode events at even higher see than in February 2020 pre-COVID. In the NTE 35 Wesy, we see the PM peaks that are above as we saw -- we showed in the slides prior to this, okay? So strong mid-year usage. All this is the reflections of what I commented before. Okay, we see the average revenue per transaction on the right-hand top side of the slide. We can see the level of increase that you can achieve, okay. So this flexibility in tariffs is great in an area that is growing economically. So the real update is there at the right bottom corner of the slide, and you can see that schools are not 100% in-person yet. I mean there's really no restrictions in terms of opening of businesses and facilities. But still you see that vaccination that advanced a lot and is probably high compared to other regions. I mean this is not as high as other countries as we see in a minute, right? So Canada that was lagging behind has overtaken these levels. And also, it's very important that Texas is leading the back-to-work polls in the U.S. according to Kastle Systems. So if we move on to the next slide, we see the I-77 that clearly has done a very important catch-up since reopening of the region. And you can see that traffic is now at the February '20 levels. And also, we have seen quite an increase in revenue per transaction. Okay. So in May 14 is when we saw really North Carolina lifting restrictions. So it's clearly a little bit behind Texas but it's there. And we can see that now close to 60% of the population at least has the first dose in vaccination. So moving on to the 407, we see the comparison to 2019 levels. And we've seen that it has been, let's say, subdued because there has been a lot of restrictions. And that's what we reflect on the insight of the slide with all the different dates and restrictions, you see that throughout the first half, there has been a lot of restrictions. Now in July, we see reopening and we'll see more of the traffic performance when schools go back to in-class education in September. The main message here is that Canada is really overtaking other countries and leading probably among the leaders in the world in terms of vaccination, now with 70% to 80% with the first dose and 25% fully by July 16, and this keeps going. So probably, this will leave a better situation of immunity that could enhance mobility going forward. If we move on, we can see the traffic comparison, how, has I was mentioning, in the opening, the last 7 days up to June -- July 20, sorry, and you have a 32% drop vis-a-vis 2019. But as I said, it is slowly catching up. Vaccination is clearly the main driver of immunity and that could help mobility going forward. If we move on, please, we can see the financial data on the 407, the 407 published some days ago. And here, we can see how traffic has been affected by all these restrictions that we've seen in case an increase in the, let's say, revenue per trip. And the tariffs have not been changed since February 2020. One of the messages that no dividend was paid in the first half of 2021. The performance for the second part of the year should keep improving, and we see that the asset has a lot of liquidity, right? We see that it has close to CAD 700 million of cash and equivalents and it has CAD 800 million in undrawn credit facilities. So there's plenty of liquidity. There's, I mean, a few maturities coming up. You have CAD 18 million in 2021. In 2022, it's close to CAD 300 million, and in 2023, CAD 20 million. So it's a very benign maturity profile on an asset that has a lot of liquidity and is recovering traffic. Okay. We also include here the Schedule 22 information that the 407 has provided. Most of you will know this information, but it's good to keep it there for you to check if you need to check in. So if we move on to the next slide. We can see Heathrow's performance. Clearly, I mean, we probably said yesterday, you can see that the restrictions to travel have been really impactful. And we can see that Heathrow has been doing a great job in containing costs, optimizing revenue and optimizing CapEx, of course, always with the safety priorities. So CapEx has been constrained and focused on safety and resilience. And it has been preparing the airport for a reopening. I mean the pent-up demand is there. In July when the government lifted restrictions to travel to a number of countries without the need of a quarantine when you were vaccinated, had a great uptick in traffic. I mean, we'll have to keep an eye on that. But clearly, Heathrow prepared for that, surge on traffic, reopening Terminal 3 and also opening T4 as released arrivals facility from people -- from these countries. Okay. So I mean, clearly affected, Heathrow a great job in terms of cost control. The outlook is probably the most important thing to mention now given that Heathrow has done its home work in terms of liquidity on cost containment, right? So regarding the outlook, I would just like to remind you of the latest investor report that points to 21.5 million passengers, but there could be a case -- strange case or a scenario where you could go to the lower part of the range, that is 13 million passengers. And just in case that happens, it's not the base case, as I said, it's not Heathrow's expectation. But if that happened, just preventing that waiver for the ICR group covenant that Heathrow Finance was launched. Expansion, we still think it should happen. And clearly, the NPA, NPS is lawful and Heathrow will reopen the Interim Property Hardship Scheme and is consulting with government, airline customers and regulators on the next steps because eventually, this should get done. Regarding regulation, there's not much to talk, but a lot is coming, okay? So Heathrow asked for a RAB reinstatement. It got a minor interim adjustment of GBP 300 million. But I mean, the understanding is that much more should be done. We'll have to wait to see how the CAA addresses H7 with all the different considerations of RAB reinstatement and allowed return for the asset. As I said, no point in discussing now. feedback will come in the fall. We'll update investors as things develop. Okay. So I just remind you that the next regulatory period is starting in January 2022, maybe there could be a potential gap, but it should start there. So moving into AGS, the performance, again, has been affected by restrictions. The main news is that the refinancing was successful and Amend & Extend of the debt facility going into June 2024. And here, there was additional commitment of funds in this refinancing, GBP 20 million, that is 100% of shareholders, they injected GBP 20 million and there's another additional GBP 30 million combined, right? And the net external debt is left at GBP 708 million. Okay, so a successful extension on refinancing and really waiting for the reopening. I mean in terms of traffic, probably worth mentioning that Aberdeen is performing better and also Aberdeen, that is related not only to oil and gas, but try to offshore wind has this sort of better relative performance. Again, there is pent-up demand waiting to travel. Right now, everything is affected by these restrictions. And also, we put in this slide some of the initiatives that the management has been doing to contain costs and CapEx. So we move on to construction that, as we mentioned in the beginning, we had a strong showing, and we compare quite well to last year. Remember that last year, the first quarter was affected by COVID with probably EBIT impact of EUR 44 million. This year has been better, of course, leaning on Budimex's strength with an EBIT margin of 8.3%. Here, there was an extraordinary component because when the real estate division was sold, there was a release of the results of the civil works department with the real estate division that was reflected in this quarter. In terms, say, we take this into account, the ordinary EBIT margin is 6.2%, that is quite remarkable in the construction sector. We have excluded in these numbers, the contribution from the real estate business. In terms of asset sales, as I mentioned, different products have been going on. The main one being the real estate that has been discussed already, EUR 330 million post-transaction cost in euros. Also, URBICSA was completed. This is EUR 17 million. And we have Nalanda, this is another EUR 17 million. This is sale of a digital platform for documentation management for suppliers, and this was closed in July. And we have just pending some final approvals also on availability concession in Figueras that was agreed for EUR 41 million, and it's just about to be approved. That should be the case. We also have the competition authorization, the Hart-Scott-Rodino for the SCC business that is agreed for $140 million. Okay, in terms of operating cash flow, clearly, as we mentioned in other conference calls, the production advance in the U.S. and other countries means there's a cash drain from an operational point of view, the new businesses that have been closed, if they -- you can come with -- you can get some, let's say, down payments or let's say, advanced payments could help in this -- in operating cash flow at year-end. Otherwise, we should be consuming cash, in particular in the U.S. Productivity cash flow is positive on the back of all these divestments. I was mentioning before the possibility of some advanced payments. Clearly, awards have been higher than other years in these late months. And you can see that not in the backlog, we have some big projects like the I-35 in San Antonio, EUR 1.3 billion or Sydney Metro that is EUR 620 million, our Budimex contract for EUR 630 million. So usually, that's quite higher than the normal pending signing for the backlog. Okay, so if we move into services, you can see that the comparison to 2020 is quite outstanding. There's a very good recovery in terms of revenues and EBITDA margins, higher activities really across the board in the U.K. and Spain. In Spain, both activities are growing revenues and EBITDA, environmental and infra. Environmental is the one that was just agreed to sell and infra is related to infrastructure maintenance, be it in civil works or hospitals and it also has some additional businesses related to energy, maintenance, lighting and so on. In terms of international, also we saw improvement in Chile and North America. In North America in particular, road maintenance is really performing well. And in Chile, remember that is related to services to mining companies. In terms of cash flow generation, also very strong, EUR 184 million with very good collection terms and activity. Cash flow that is EUR 149 million does not include any impact from asset divestments yet. Also, I'd like to mention waste treatment in the U.K. As we said, we are keeping that for, let's say, some reshaping of the business. And in particular, we are looking at the potential to improve York Waste Recovery Plant. We are trying to convince client and other potential clients of really treating more tons and so trying to buy capacity here because in the U.K. and our places, there's waste going to landfills. And from an environmental preview, we think we have a good proposition, right? So this is the kind of proportion that is being done to turn around some of these contracts, okay? So if we move on to the next slide, we have more information on these numbers regarding the disposal of the environmental services in Spain and Portugal. Environmental services is mainly waste treatment and collection, also recycling of plastics. And this has been agreed to be sold to PreZero that is a company from the Schwarz Group, the enterprise value is EUR 1.133 billion, with an equity value taking into account the balance sheet at the end of 2020 and equity value of EUR 950 million. And here, we have some numbers for you to assess the transaction. The EBITDA for 2020 was EUR 130 million. This includes some EBITDA from projects around EUR 29 million of EBITDA that usually gets dividends, and this is the way we portray them in our results. And you can see that on a recurring basis, this EUR 29 million EBITDA produces something like EUR 10 million of dividends. Okay, so we expect closing of this to happen this year. We can move on to the next slide, please. And here, we have a rundown of the main items of the P&L account. Well, the higher revenues are really helped by all the divisions, construction and toll roads. Remember that we don't consolidate the airports business, as this is the one most affected by restrictions. EBITDA, it's also quite higher than last year, close to 89%. And this is also held because last year, we took a provision for the restructuring of the support functions. In terms of financial expenses, it's very similar to the first quarter when I mentioned that in the infrastructure projects, we have the effect of the mark-to-market change on the inflation of Autema. Remember that Autema has pretty much negligible value for us, and it has a book value of negative EUR 135 million. So for it to be sold for, let's say, EUR 1, you would have that sort of positive P&L impact. And then ex-Infra projects, which also have some additional cost as the impact of lower cash remuneration and higher average gross debt. The higher average gross debt should be sorted out with the repayment of EUR 500 million of a bond in midyear. So we should have more comparable gross debt in the remainder of the year to last year than this first half, okay? So gross debt has been -- is going to be reduced slowly along the year. Then we have the equity accounted results. Here, we have lower results in the 407 ETR that we already mentioned. And then you have Heathrow with all the limitations in traffic affecting. And in AGS, we also have an impact and it's basically for the equity that has been injected in the company that has to be provided, right? So we have now a 0 book value for Heathrow and AGS and that should kind of freeze the impact of results until we recover above that nil value. In terms of net profit from discontinued operations, we have EUR 208 million, and this is almost evenly split between the impact of the real estate business divestment and the positive impact of Ferrovial services in Spain. Remember that as long as you have offers as is the case with environment that are above and the fair value that you have in your books, you can keep recording this profit that's the reason why we are recording them now. Now then we have some minor adjustments in international services. Some of them are related to the waste treatment that we discussed in York, that we are trying to turn around, but we took the view of taking a provision and see if we can get the turnaround that I was mentioning of treating more tons that would be good for the environment. Okay. So if we move on to the next slide. We see the cash flow evolution. So I will comment on some of these -- of this breakdown. Well, the dividends from projects we already mentioned, mainly coming from LBJ and NTE. Then you have the working capital evolution that reduced in the first part of the year happens -- is affected by construction kind of unwinding some of the advanced payments at the end of last year. Then we have investments that are higher this year than the past, in particular with the I-66 being invested -- deployed. Then you have divestments and shareholder remuneration when most of it is share buybacks. In other financing cash flows, the main impact is the deconsolidation of the cash from the real estate division at Budimex. So it has to be seen in conjunction with the number of divestments, right? Okay, so we end the semester with -- the first half of the year with a very strong position of around EUR 1.86 billion. Okay. So if we move on to the sustainability part. Here, we will have a more detailed rundown of KPIs at year-end. But I think it's worth mentioning some of the different milestones achieved or awards. I already mentioned that we have 2 new independent Board members, female, that I commented in the first quarter results. We also had at our AGM, our climate strategy presented to shareholders that had a 96% votes in favor. We also published in our website the Supplier Code of Ethics. And our different businesses are also launching their sustainability strategies, AGS in particular, there's a lot going on around Heathrow. I encourage you to visit their website where they have a lot of info on that. And then, of course, there's some awards for your producer. And we can move on to the concluding remarks. And here, very important messages. I mentioned in the past that the economic recovery and vaccination are very important to recover mobility. And also, it's -- the flexibility in tariffs is proving very beneficial and with some sort of inflationary pressure more so. In airports, restrictions are still there, but we see some light of some reopening. Pent-up demand is there. We really need to get more vaccination and health passports working for more traffic to recover. Contracting is performing well. We cannot say it's affected by COVID. Now it's performing well with good margins and excellent contribution from Budimex. In services disposal, we had a major step with the waste business in the Iberian Peninsula have been divested. And the rest of the processes are ongoing. As I mentioned in the other conference calls, we want to have most of them signed this year, even though closing to the -- as leap into next year, but we'll try to accelerate if the market is there after, let's say, the kind of COVID stoppage last year. And then we closed with a very strong financial situation. Now we have good dividends from the managed lanes and the asset divestments. I already mentioned some of the ones that will be coming in the second part of the year. Okay. So thanks for bearing with us, and let's open the Q&A session.

[Operator Instructions] The first set of questions come from Alejandro Vigil from Bestinver. Please could you update us on the strategy to sell the remaining assets in services after the Spanish media's comment about a potential combination with other companies in Spain?

I'll take this one. This is Ernesto. Well, the remaining services in Spain,are related to infrastructure maintenance, I mean, from hospitals to roads, bridges, tunnels. It also has other things like some energy efficiency parts, from lighting, it has a variety of services and capabilities that are differential. So we are open to different alternatives. We think that it could make sense given that the market is with quite a number of players hold market shares, even though we are one of the leading companies, we are short of 7%. So adding differential capability from a technical point of view and scale could make sense. So we are open to that. And the assets should grow. We should reduce our exposure, but should grow with the help of, as I said, these differential capabilities and also the possibility of platforms. Why not, it could mean that the only thing I can comment.

So also from Alejandro. Could you comment on the use of proceeds from the sale and priorities in terms of reinvestment versus dividends?

Okay. Here, we remain in that the preference for management is to create value with industrial investment. We know that we are kind of advancing with sales and generating cash and maybe not investing that much, but the whole company is working on different strategic initiatives from the Horizon 24 plan. And we expect to deliver. So if there's a preference, there's a preference for that but of course, always keeping an eye on balancing with remuneration to shareholders.

And last question from Alejandro. When do you expect Ferrovial dividends to its shareholders to return to pre-COVID-19 levels?

Well, we'll have to say the Board is looking at that, no decision yet. I mean, that will come probably more update in the next quarter or at year-end results, but is looking at the pipeline, the different opportunities and also the results. So no decision yet, but we are on the path to that.

The next set of questions come from Charles Maynadier from Kempen. How much roughly does Portugal represent from the EUR 130 million EBITDA of the environmental services, which has been sold? Is this part included in the International segment that you report?

Okay. It's quite small. I mean it's, I would say, slightly below EUR 6 million of EBITDA, like EUR 5.6 million or something like that, if I recall correctly. And just previously, it was reported in the international support, in the international part of the business.

Also from Charles. What is the book value of the business that remains after the transaction?

Well, the book value for the total services was just north of EUR 1 billion, like EUR 1.30 billion. The one that has been agreed environmental services in Spain and Portugal, has a book value -- had a book value at the end of 2020 of EUR 600 million, right? So just doing the simple math, the remaining is EUR 430 million.

Also from Charles. Post this divestment, what type of activities do you have left in Spanish services?

Okay. Well, as I said in the prior question, the main ones are infrastructure maintenance that means an integral approach to buildings, hospitals, industrial maintenance, also infrastructure maintenance like roads, bridges, tunnels. And you also have other additional services that are related to optimization from an energy point of view, lighting, that sort of thing, right? So the main ones are the ones that I mentioned, even though there are some other minor activities.

And finally from Charles. What is the status on the rest of the sale for services? Can we expect any news flow soon?

Okay. So yes, we have a variety of processes here and well also some activities, for instance, in the services portfolio, there was a concession that is a shadow toll that is called the A2 Autovia. As I said, it comes with a maintenance contract. But the main value driver is this shadow toll concession. This shadow toll concession has an EBITDA of around EUR 30 million give or take, more or less EUR 30 million, right? In 2019 and on a non-COVID, but it is quite resilient, as I said, it's a shadow toll. Given that it's a shadow toll concession, we think it fits more with Cintra rather than being sold. So that part is carved out for Cintra. We will see it with Cintra forward, as I said, it's a shadow toll. Then the infrastructure services for maintenance, maintenance of infrastructure in Spain is another process. Then we have one in Chile. And then the other one is maintenance in the U.S. And of course, we have Amey that has main Amey, the core and also has a separate process that is for, let's say, utilities maintenance. Okay. So we have a variety of them. And as I mentioned, also waste treatment in the U.K. that has been, let's say, overhauled and will come to the market later on. The others that I mentioned are all scheduled to be kind of signed in 2021.

The next set of questions come from Luis Prieto from Kepler Cheuvreux. Can you give us any update on the high complexity concession pipeline in North America? Are you detecting increased competition in those projects in which you would be interested?

This is Pedro Losada from Cintra. We are keep on following the market with feeling positive to see new opportunities coming to the market with respect to high complexity is a little bit soon. But we know that some of the DOTs as the one that has been announced from Georgia, are planning to bring new high-complexity projects to the market. And we know that in the short and medium term, some of the DOTs are going to bring back also some of these projects. With respect to competition. It depends on the type of the project. If we are talking about these high complexity greenfield projects, managed lanes, dynamic tolling, there's not too many out there, the usual suspects, and we don't see too much competition. As you know, we feel that we have still high competitive advantages to understand much better this type of projects. So -- but we don't see too many players coming soon to these complex projects. Now there are some other type of projects as the ones that we have been prequalify already in Miami or I-10 in Louisiana and working on the prequalification of Pennsylvania bridges where there are different risk profile. And potentially, we can see other type of competitors or more competition coming from both infra funds and developers as well as construction companies.

The next question also from Luis. What is your view on the current iteration of Biden's infrastructure plan proposal now that it seems that 3P or PPP approach could be explored in order to finance of the projects?

We see the Biden's infrastructure plan quite optimistic and very good news for our company. As we have said many times, at the end of the day, the final decision used to come from the federal governments are the ones that need the political green light to go on with the projects. But from a central government, they could provide some critical help from the developments of many projects with the TIFIA program and other flexible financing and that kind of stuff that definitely could boost the final stage of the projects to make them available and to make them profitable for the developers and at the end of the day, to make them possible. So that's the main idea from us behind the central government's support perhaps is too premature because we don't have the exact details of that plan.

The next set of questions come from Elodie Rall from JPMorgan. How do you explain that traffic on LBJ is still lagging compared to 2019 levels despite Texas reopening? Do you see risks on the structural impact of this sole road specifically?

This is Pedro Losada again. Thanks for your question. Let me start with the second one. We definitely don't see any structural problem in this road. As we have said and we are keep on improving in things like vaccination, economic recovery from GDP perspective in the area, unemployment rates. But it's true that there's some differences between LBJ and the NTE and NTE 35 West. Some of them are the ones that is impacting more in the performance and the speed of that performance with respect to the other ones, things like the proportion of white-collar workers with the ability to work from home higher among the LBJ users than in the NTE areas. More demand lack due to less density, vehicle per mile recovery on LBJ's purpose lanes compared to NTE and NTE-3 and perhaps also lower proportion of trucks in the LBJ. Remember that also it's been impacted by construction works on the 635 East that is going to have some negative impact, probably in the coming years during the construction and positive one in the long run. As soon as we recover traffic, particularly on the peak hours, the revenue per transaction will increase. And we will see probably some acceleration on the LBJ recovery. That recovery stage will be driven by return to office in that particular area. And in Dallas, particularly, most offices are planning to full or hybrid open in fall 2021 and also main school districts have announced that this next school year starting at the end of August will be 100% in person. So again, coming back to the argument of the increase in revenue transaction and the increase in traffic in peak hours, help us to understand that we need to feel a little bit more positive on LBJ.

And the last question from Elodie. Given your comments on likely recovery in the second half at the 407 ETR and the strong liquidity position at the assets, can we expect the 407 to pay a dividend in third quarter? Or do you think the fourth quarter is more realistic?

I think that what we have shown in this presentation is that as soon as restrictions are lifted, we are showing a quite accredited recovery from the 407 with respect to 2019. We are still under Stage 3 that will end probably in mid-August. So after all the restrictions are lifted is probably the right time to evaluate when the company is ready to distribute dividends. Good news is that an acceleration on the recovery and the better performance in the first quarter of the year and also a good and healthy liquidity position that give us the opportunity to do so by the end of the year. I don't know if it's going to be in the Q3 or Q4. But now that we feel optimistic also with -- that we are in compliance with the debt service coverage ratio and the rest of the covenants that we need to comply to distribute dividends. And having the cash in our accounts, we believe that we are going to be able to distribute dividends, but I'm not sure yet it's going to be Q3 or Q4.

The next set of questions come from Jose Manuel Arroyas from Banco Santander. First question, Dallas is showing that traffic patterns are changing with morning peak hours flattening, but afternoon peak hours becoming more meaningful than pre-COVID. Is it enable to assume that a similar traffic pattern could materialize in Ontario 407 ETR post restrictions? And if so, how would this impact the 407 ETR in terms of meeting Schedule 22 traffic thresholds?

This is Pedro. It's so that we see some changes in traffic patterns with respect to peak hours and AM/PM traffic. It's true also that we are seeing these different traffic patterns with some of the restrictions still there, for example, with respect to schools and offices. When it comes to your question on whether it could materialize in Ontario and whether it could have an impact on Schedule 22, I would like to remember the way it's measured, the Schedule 22. And it's based on the highest 2 peak hours of every segment independently. Then according to the AM or PM peak. If the PM peak are now higher than the AM, there will be the ones used for this Schedule 22 to calculations, then having a neutral impact. Actually, I remember properly most of the average segments flow rate were calculated with the PM peak hours as the highest values.

The last question from Jose Manuel. Raw material prices inflation. How concerned are you about rising raw material costs hurting construction margins in the foreseeable future? And what can be done to offset this inflation?

This is Inaki Garcia from Construction. Yes, actually, we are observing increases in prices in raw materials like bitumen, cement or steel, and we are constantly monitoring this in our main markets, U.S., Poland and Spain. But as you know, these impacts are very regional. I mean -- and very specific in each one of the areas. So whatever you see, I mean, cannot be extrapolated from one area to another. But the way we monitor this is in 2 ways. I mean, first in our backlog. And of course, as you know, in Spain and Poland, there are indexation formulas with -- public administrations will limit the impact of this inflation. But also, I mean, in the early stages of every peak, we tried to close long-term contracts with our suppliers. So somehow the prices are fixed in most of our backlog, and we don't expect a huge impact in our backlog. And regarding new contracts, Ferrovial is just in quite advanced tools to better estimate this inflation. We are using data analytics and also artificial intelligence in every new bid, I mean, that we are bidding. So well, all these new contracts are factoring these increases in prices. So we believe that all the new contracts and those that you have seen that are not now included in the backlog have considered this from the -- even from the early stages of the design.

The next question comes from Filipe Leite from CaixaBank. As EBITDA, the line others recorded minus EUR 13 million in the first half of 2021 versus plus EUR 15 million in the first quarter of 2021. What is the reason for such a difference in the second quarter?

Well, here, there's 2 main items that changed from plus EUR 15 million to minus EUR 13 million. And one of them I already mentioned is the provision for the waste treatment York plant, that is like EUR 12 million. And then there's another provision of EUR 15 million because there has been an agreement regarding the SH130 litigation. And we've taken that in others ahead of the signing.

The next set of questions come from Nabil Ahmed from Barclays. First question on the managed lanes, since traffic is broadly back to pre-pandemic levels. Could you please maybe elaborate on the mix? Are heavy vehicles much higher and cars may be still well below pre-pandemic levels, and therefore, is the average revenue per transaction still strongly influenced by this mix? Can you please give us an idea of average revenue per transaction versus 2019, excluding the vehicle mix?

The heavy vehicles has grown versus prepandemic. Light vehicles are also at the same levels as prepandemic, except on the AM peak, and we are expecting to recover that traffic once the offices and the schools are hopefully back in September. With respect to the mix, we do not provide that breakdown, but we can share the last part of your question with respect to the comparison with 2019. And that mix with respect to the revenue per transaction versus 2019 is kind of a 1/3 from the mix and of vehicles and 2/3 comes from toll rate increases.

Also from Nabil. About Schedule 22, could you please provide details as to what exactly triggers the end of a force majeure event? Does the 407 ETR need to recover to pre-pandemic traffic of the majority of the network or all of the sections and for how long? And what is the pre-pandemic reference exactly?

The company and the province agreed that the force majeure event terminates when the traffic volumes on Highway 407 reach pre-pandemic levels. Measured as an average of 2017 to 2019, 407 and the interchanges; or when there is an increase in toll rates or user charges. That's basically the agreement that we have reached. And if any of those 2 things happens upon the termination of the force majeure event, the company will be subject to Schedule 22 payments commencing the subsequent year.

The last question from Nabil. Net working capital consumption seems to be lower than the seasonal drag that we have seen before. What is the reason for this?

Well, in general, I would say that the collection performance or days of sales outstanding in the Services division has been outstanding. I would say that in construction is more similar to what we've seen in other places. But in general, we see that public clients are really paying well. I mean better than in the past. So probably there's kind of a trend for keeping that sort of liquidity and good payment terms. That has been the main help. Also in services in the U. K., we were expecting to have to pay back some of the VAT and other taxes that were delayed last year that also has been postponed. So that has also helped. But I would say that the main component is a good, very short days of sales outstanding in general.

The next set of questions come from Tobias Woerner from Stifel. First question, can you give us a bit more color on the opening steps in Canada also in terms of dates?

Well, Canada started the -- in 3 different stages, the reopening started in June 2, as far as I recall. We started a few days ago the final stage of the reopening in mid-August. So after that, we are hoping to see almost full reopening of the of the country, assuming that also schools are going to be open 100% physically, and also, hopefully, to see a lot of offices coming back physically as well.

The next question also from Tobias. The 2.4% construction margin would be where when adjusted for all of the one-off effects?

Inaki again. Just to be clear, the 2.4% in EBIT, doesn't include any surplus of the divestments of URBICSA or the real estate business of Budimex. So the only one-off effect included in that number is what Ernesto mentioned at the beginning, that is a EUR 50 million margin with the real estate business that was adjusted in the consolidation, and once the business has been sold, must be included in the construction business. So excluding this EUR 50 million, the EUR 2.4 million will be around the 1.9% EBIT, I mean, so in the trend of the 3.5% that we will get in always Horizon 24 in '24.

The next set of questions come from Patrick Creuset from Goldman Sachs. How do you intend to use your significant net cash position, especially including the announced divestment proceeds? And what is the scope for increased shareholder remuneration and potential timing for a clearer dividend buyback policy?

Well, here, the preference that I mentioned before is to create value from an industrial investment point of view. Of course, that value creation gets reflected in the increased shareholder distribution a long time. Being specific, now it's something we're not doing. We're looking at different things and potential for investment on the wake of the pandemic, and we cannot be more specific at the moment. We'll try to provide more clarity as we clean share investments and materialize the divestments, but not for now. Apologies for that.

The next set of questions come from Marcin Wojtal from Bank of America. First question, what is your dividend policy for the NTE and LBJ? Will they distribute 100% of their free cash flow?

Well, we don't have a dividend policy for NTE neither LBJ. We need to comply with the financial covenants when we pay the debt service that comes under the month of June and December, and based on the performance of the assets and the decision of the BoD, the Board of Directors, we decide on the levels of dividends to be distributed. But there's no dividend policy per se.

Also from Marcin. Do you expect any of the cost savings that have been achieved in your toll roads in the last 18 months to become permanent?

We constantly look for efficiencies in our operations, but as traffic recovers, most of the traffic-related costs should go back to pre-pandemic levels. There's different scenarios in different assets, it's not the same for them, but I would say that it would be the broad answer to your question.

The next set of questions comes from [ Alexis Bille from Schonfeld ]. First question, could we see price increases in the 407 ETR already in 2022?

Remember that as we have explained, the way it works with respect to the force majeure event that give us the possibility not to enter into any Schedule 22 payments also is related to our ability to increase prices. Perhaps it's too soon to understand whether we are ready to increase prices in 2022 and then face potential Schedule 22 payments. But we are constantly monitoring traffic performance in the facility and main alternatives and making estimates of the Scheduled 22 payments, as I mentioned before. If we see that there is a market volume increase in toll rates versus accepting Scheduled 22 payments, it will be analyzed and obviously considered.

The last question from [ Alexis ]. Could you give us some visibility on greenfield or brownfield projects or M&A pipeline over the next months?

This is Pedro. I'm going to give you some brief or additional visibility on the already mentioned with respect to our pipeline in the U.S. I mentioned some of the projects that we have been prequalifying in Florida, in Louisiana, trying to find the -- also prequalified in Pennsylvania and waiting for other for other high-complexity projects coming up in the form of the managed lanes from some of other states. We are quite positive that, that is going to happen. Outside U.S., we are following also opportunities in LatAm, particularly in Peru and Colombia with [ Segment 2 ] those or Ruta 78 as well as other projects in Europe, particularly in the U.K. and some other alternatives in Australia that has been also core market outside our primarily marketed which is North America, and we are holding to -- we are operating 2 different concessions there in Australia. Let me give the floor to Inaki to comment on the rest of the pipeline.

Yes, more than the pipeline, regarding M&A transactions. And I think it was mentioned in the previous conference call. We are looking carefully. I mean, to bolt-on opportunities in water and construction, particularly in the coast of the U.S. And also, we mentioned that Budimex -- taking part of the proceeds of the sale of Budimex and [indiscernible], we are thinking in expanding probably in FB Serwis, I mean the service division. But also analyzing opportunities in energy and maybe looking to other opportunities in closer markets or closer countries to Poland.

This is Ignacio Gaston from airports. There's a few comments from my side on your question on pipeline. Just to confirm that we are monitoring the market. There are opportunities on a global basis. We are indeed working on 4 projects. Additionally, we are doing preliminary work in several projects. That's one the vaccination progresses for COVID, they should be unwinding. With respect to specific opportunities. Brazil is producing a very active pipeline with respect to privatizations and potential retenders. And we are also following opportunities in Asia, Turkey and the U.S. should the opportunity arise.

Thank you very much. And thank you, everybody. There are no further questions. Thank you.

Well, thank you all for bearing with us. And I think we keep delivering on the milestones that we set ourselves to do. And well, please enjoy your healthy rest and see you soon. Bye.