Global Dominion Access, S.A. (DOM) Earnings Call Transcript & Summary

Welcome to Dominion's results presentation. [Operator Instructions] [Foreign Language].

Good evening everybody, and thank you for coming to this presentation results. We have not only publicized our figures for this third quarter of the year. But we've also announced a corporate operation which we would like to simplify company along the lines of what we defined in our 2023-2026 plan. So yesterday, we signed an agreement with Grupo Serval in Portugal capital to disinvest our maintenance service unit in Spain. And this covers several activities like a multi-technical assembly work, automation and industrial logistics. So these are contracts that are not efficient. They could be operating in a competitive environment too and the perimeter that will be deconsolidated once the process finishes. It covers EUR 105,000 million in turnover, EUR 4.8 million in EBITDA, that would mean that [ about 1,500 ] jobs will need to be transferred. So this is very -- it's very intensive in direct labor, and it also consumes lots of management resources and with margins that are much lower compared to the average of the rest of our services and therefore, they are much lower than what we want to achieve. And these activities are not directly in line with our positioning in relation to say sustainability. This is another [ lucrative ] strategy that we want to focus our services and projects on environments that are supported by the tailwinds of sustainability. and we want to become an enabler for the transitions and challenges that our customers are facing. So in this regard at Dominion, we have many other services and projects in the area of industry is those that are in line with the strategy like industrial cleaning services or waste management circuit economy, energy efficiency or the reduction of emissions among other services that are related to decarbonization. The operation has been signed for a price of EUR 27.5 million, approximately subject to the final figure of capital with which the operation will be closed and with earn-outs that present a negative taxable basis. And this will represent a capital gain of EUR 11.6 million. and it's expected the operation will close in Q4 of this year once we receive the authorized from the Stock Exchange Commission. And for Dominion it's important to perform this operation because in quantitative terms, it gives value to a business that was not a priority for us which had lower margins and also because an important amount of cash flow was arriving -- and in quantitative terms, it has brought about strategic progress, which together with the restructuring the B2B2C. And last year, it organizes our activities and limiting those are all that profitable. . So it's all about simplifying things, which is what we are currently doing since we launched our strategic plan. So once this operation has been mentioned, which of course does not going to be seen in the figures for this 9 months, we got we talked about how the business has evolved with Q3, where we've maintained and reinforced certain trends that we already saw in previous quarters. We have a very good evolution in the service segment that maintains very strong organic growth, but above all, the high level of operating margins, which in this quarter have reached historic levels. But moving on to the financial results of the last 9 months. At a global level, we can see that there's been a growth of about 1%, because there are nearly EUR 23 million in turnover eliminated inorganically related to the business of mobile devices that was restructured in 2023. In other words, inorganic subtracts 2.7% and -- and the variation of the exchange rate also subtracts 1.2%. So that means that the organic growth of sales at a constant currency is not flat, but it's only 5%. So therefore, it's fully in line with the objectives of percent of sales. And we will be talking about each business segment. But since the previous quarter, we have -- we've slowed down the execution of projects particularly anything related to renewables. And even so, this global growth of 5% means that the strength of services fully compensates the slowing down of the projects. And this is a behavior that also affects the margins, which delivers a very positive reading as regards to the future when we readdress the rhythm of execution of projects in these services that are very strong. As regards margins, there's going to be a significant improvement with an EBITDA, which is 7% higher than the figure reported last year. And although we had to focus on the level of profitability of the sales, and we've reached the maximum level with a contribution margin of 15% and EBITDA of 12.5%. We'd like to remind you that the strategy is about focusing the company on these activities and businesses that are more profitable. We have to diminish those activities that have lower margins although we have eliminated sales with lower margins with the restructuring of B2B2C and with the operation that I was talking about, as I said, and the important thing is that we need to achieve quality growth and profitability amortizations that are going to increase, especially after the device renting business has grown and it's the business that has reported the highest level of growth and higher levels of amortization. As regards of financial expenses, we have an unfavorable comparison because the differences in the exchange rates represent EUR 2 million negative in addition to the financial expenses that we had in previous quarters and which have not yet felt the effect of the recent lowering of interest rates. So therefore, the operational improvements and the leverages arising from our lighter structure and from lower amortization has been mitigated by the financial results and by the result of interacted activities. We've achieved a net attributable profit of EUR 20 million, which is 26% lower than the figure reported last year. And this behavior of net profit, we know it's going to change in the future, thanks to how interest rates are going down and also because we are progressively reducing our debt. And by segments, we have -- on the one hand, we have sustainable services that increase their weight in terms of turnover and margin, and they account for 73% and 64%, respectively. Services grew organically 8.2% over and above the targets and exceeding the rate of growth to this segment in recent years. And we don't only have a good dynamic as regards to the growth of the business, but also in relation to how the margins have evolved, 12.6% accumulated at 9 months, and it's a record profitability that I consider has to be mentioned in a world and in a segment like this grid is a services. We are -- clearly want this segment to obtain a higher added value. And of course, it has to be focused on sustainability. We're now seeing the end results of the measures taken. And as you can see, we are still implementing them. And the strength of the segment is very relevant to the extent that it's a segment that has a very characteristic recurrence and therefore, gives us a very positive visibility card in the future. And the segment of 360 projects, has been sped up and in the quarterly results we have carried out a minimum number of renewable projects. However, for other projects, whether they be industrial or concerning social infrastructures, the rate of execution has been as expected with high profitability levels. They're still above the targets, and they exceed the threshold of 19%. of the contribution margin. As regards to future visibility, we've seen that there's been a good rhythm of growth, especially in this quarter, focused on the industrial sector with some relevant projects in the United States and Canada and the current portfolio stands at EUR 628 million, which together with the future recovery of the rhythm of execution on renewables means that the prospects for the segment are going to be record in the next few quarters. And finally, as regards to stakes in infrastructure, the small variations in business figure and EBITDA related to above all to currency effect. And in interrupted activities, we have the result of the wind farm in Ferio, which is negative because of the financing expenses and that is already energized and it's pending being commissioned, there no more important variations in this segment, although we have to wait for the negotiations to finish. As regards to balance sheet movements. And although we have not presented any details, we have to say that most of the cash consumer movements took place in the first half of the year, and to which we have to add the payment of the dividend in the month of July, totaling EUR 14.7 million. And on the other hand, during Q3, we also had the operational generation of cash flow. And as regards to the future, part of the disbursements made in the first part of the year will be contracted by the incorporation of corporate divestitures and other corporate operations and infrastructure divestments. But to finish, we are talking about the year 2024 as a year of transformation and I would say that this third quarter is a quarter in which we are making progress and very positive progress because you can see that the underlying dynamics are very favorable, and we are progressing because we are materializing the targets that we have set ourselves. Thank you very much for your attention. And now we can move on to answering your questions or to clarify your doubts. Thank you.

[Operator Instructions]. Firstly, we have Enrique Parrondo from [indiscernible] Capital.

I've got 3 questions to ask you. The first question has to do with the guidance on EBITDA that you shared in the previous quarter of about EUR 150 million. And I'd just like to confirm that this was organic. In other words, it did include EUR 11.6 million of the whatever figure that you announced today. And the second question has to do with the growth that you expect for the 360 Projects division. And this has increased the industrial project significantly. But I'd like to know what do you think is going to become short-term sales and what kind of classifications could be established for 2025? And then finally, as regards to developments in renewables, if I'm not mistaken, in the third quarter you were going to commission the farms in Washington, 2 and 3 [indiscernible] and could you please say something about that? Could you give us an update on what's going on, would I would be very grateful for that.

Well, thank you very much. I'll answer your questions. The guidance for EBITDA. We know that at this company, we always present a result that is recurrent. And what we can see here is that we have a budget and guidance at EUR 150 million, at least, and we will be focusing on that figure. EUR 150 million of recurrent EBITDA. And as regards to what you said about renewables and as regards some minor restructurings that we're carrying out at this company, we will have a nonrecurring impact that we can compensate with positive recurrent outcomes. And the issue is that this should be compensated even at the same level of the financial statements. In other words, as I say, we will stick to that figure. we will stick to those EUR 150 million that we agreed to with the Board. As regards to renewables, on the other hand. Well, yes, in the Dominican Republic we expected in Q3 to commission the projects we have there. La Victoria, we're already building the substations, but this is going to happen next year. And it is true that we are still accumulating that over delay. Perhaps next week, we might be evacuating energy at La Victoria. We are moving on to the final stages. I don't know if it's because it's the Caribbean, but things have been delayed. And this has obviously produced more financial expenses because there is a portfolio there and the idea in the Dominican Republic is to do things after we achieve a suitable rotation of the asset. As regards to 360 growth, but it has more to do with the portfolio. we've received a number of relevant projects in whatever has to do with our world of decarbonization and energy efficiency. And we've received another EUR 50 million or EUR 60 million approximately, but in any case this is obviously going to be carried out in the next 2 years. So it's not that this is going to have a very big impact either on the pure revenues of Q3. we're talking about a figure that is not very relevant. But, Patricia, perhaps you would like to say something.

Well, we're talking about visibility beyond 2025. We have this project that is in line with the strategic plan. We're talking about more than 5% in growth. And we've said that this slowdown is something that's really happening now. We haven't lost those margins, but rather, they're going to be transferred. So we should expect to have normal levels of execution in the near future.

Perfect.

We'll continue now with Carlos Treviño from Grupo Santander.

Sorry, Carlos, we can't hear you. I'm not sure if you're muted.

Hello.

Yes, we can hear you now.

Three questions. The first question. How is your search for a partner in rubles going in Europe? I think that your reviewing the portfolio, and there could be other businesses which you could divest. And today, you've announced the business that nearly accounted for 9% of your sales last year. But my question is there -- are there any businesses that you are reconsidering or any other thing that would be rated as a minor activity? And the third question. Could you give us a little bit more about how the generation of cash has evolved in this quarter. And I'd like to know how we would finish the year in terms of net debt/