Obrascón Huarte Lain, S.A. (OHLA) Earnings Call Transcript & Summary

Good day, everyone. We hereby begin the General Shareholders' Meeting that we held in the second calling and that we do completely in remote format. I avail of this introduction to greet everyone who's connected to this session, mainly the shareholders who are remotely here with us today. Next, we're going to proceed to the constitution formalities of the General Shareholders Meeting, the secretary. Thank you, Dear President. Well, according to the articles of association and the relation of the meeting, this meeting is held only remotely as agreed by the Board of Directors. The company has given the shareholders the possibility of using beforehand, the procedure of delegation, voting and remote assistance also allowing to participate remotely and to vote [indiscernible] of the meeting according to the rules approved by the Board of Directors and the procedures haulage for its functioning and published in the announcement of the call on the corporate website. Likewise, the general meeting, as usual, may be followed live and after the recorded version will be available on the corporate website. We have presently here around this table, the President Mr. Luis Martín Amodio Herrera; Mr. Tomas Ruiz, General Director of the Group; and myself, Jose Maria del Cuvillo Pemán, Secretary of the Board. We also present the Deputy Secretary, Ms. Maria Fernandez and remotely, we have connected with rest of the members of the Board of Directors, Mr. Mauricio Martín Amodio Herrera, Francisco Garcia Martin, Reyes Calderón Cuadrado, Carmen de Andrés Conde, César Cañedo-Argüelles Torrejón, Juan Antonio Santamera Sánchez and Mr. Luis Fernando Amodio Giombini, and Ximena Campos Caraza. Finally, I'd like to state for the minutes and for the voting [indiscernible] we have here the notary from the registration of notary public of Madrid, Mr. Jaime Recarte. Thank you. This general meeting is held in accordance to the provisions established in the Articles of Association and the regulation of the meeting of the company, the announcement of the call of this general meeting accordance to Articles 173, 177 and 516 of the Corporate law. And in Article 14 of our Articles of Association that was published on the official gazette of the company registered on May 24, 2024. On May 23, the announcement was inserted on the website of the company, and his publication has been kept in the legal term until this date. Likewise, on May 23, in accordance to the provisions of the securities market law, the calling of the meeting was communicated to the National Committee for the Securities Marketing Paying through the relevant notification. The text of the calling of this meeting that has been available with the rest of the documents on the corporate website and on the social headquarters has been given out for free to whoever requested it. And it is hereby deemed to be read. I ask the secretary to please continue to the formalities of the constitution of the meeting.

The separation of these general meetings regulated by articles 159 to 203 and 511 base to 527 of the corporate law. And in the case of Obrascón Huarte Lain S.A. in Articles 11 to 19 of the Articles of Association and the regulation of the meeting. In accordance to these articles in the general meeting, we act as President and Secretary, the people who have those responsibilities on the Board of Directors of the company. That is the president of the board, who is now speaking, which Mr. Luis Amodio and the notary public, Mr. Jose Maria del Cuvillo Pemán, the Secretary. Next Secretary will inform the assembly about the present and represented shares in this event. The list of shares present and represented in this event formalizing in accordance to articles 192 of the corporate law in the relation of the Board and the specific procedure approved by the Board of Directors shows 24 shareholders present, holding 2,559,000 shares representing 0.33% of the share capital and 111 shareholders presented holding 172,682,760 shares representing in 29.213% of the share capital. And we hereby attest that the treasury stock for the company that amounts to 748,695 shares has been calculated to calculate the percentages for creating the meeting -- leaving exclusive the shares with voting rights according to the law. Therefore, the shareholders present and represented are 135 in the shares present representative are 175,242,140 shares, equaling 29.646% of the share capital, a quorum, which is legal enough to celebrate this meeting in the second calling in accordance to the corporate law and the articles [indiscernible]. We hereby attest and in accordance to Article 189 of the corporate law, we have qualified as present capital, those shareholders have each of their vote remotely. Likewise, we hereby attest, the presence remotely of a shareholder who has 555 shares, representing 0.009% of the share capital. In compliance with provisions of Article 21 of the relation of the General Shareholders' Meeting, we hereby attest of the members of the Board of Directors have the presentation of 19,163,483 shares. The ownership of shareholders from other shareholder groups representing 10.9% of the quorum. Likewise, the Board members of the shareholding groups representing in the Board hold a total of 153,519,277 shares, representing 87.604% of the quorum of this meeting. Since there is no agreement in the agenda that require reinforce quorum and since this second calling of the meeting, we will have a minimum quorum for constituting the meeting that's in agreement with Article 16 of the articles of association, and Article 193 of the corporate law. We hereby attest the right to the shareholders to check if they wish the list of shares present or represented that I've just referred to. So we have justified at the request of these presence, the existence of the right quorum to celebrate this meeting. Therefore, the president will declare and declares legally and validly constituted the General Shareholders Meeting in the second calling to then go into analysis and approval, if appropriate, of all the items, including in the agenda. Next will give the floor to the notary public, Mr. Jaime Recarte for the appropriate legal warnings.

Thank you, Dear President. I ask the shareholders if they have any reservation or protest regarding manifestations of the President and the Secretary regarding the number of shareholders the [indiscernible] and the present and represented share capital. Since this is remotely, you can write this manifestation to the link on the app. And hereafter, therefore, ladies and gentlemen, these shareholders, we have constituted the General Meeting to deal with the matters including in the published agenda. As the first item of the agenda in agreement with the remote assistance norms, I hereby declare the question round close. I also declare finished the period to each of our votes regarding the proposals about the items in the agenda that may have been voted remotely following the instructions as stated in the corporate website until this moment. The agreement with the applicable regulation and published with a meeting -- with the call of this meeting, an intervention request for information, clarification and proposal of agreement some matters that are not in the agenda that may be proposed legally during this meeting will be answered in the Q&A session at the end of the presentation section of the Secretary and President and the director of the group within the next 7 days in writing. On the other hand, the shareholders have registered on the period given to that and that have used the legal procedure to express their will to intervene, can do so at the end of the President's presentation and also a presentation of [indiscernible] director of the group. Verbal questions by the shareholders may be answered in this event or in writing within the 7 days following this meeting. If any shareholders wishes their intervention to be reflected during the minutes of meeting the need to request it in writing to the notary public remotely through the channel enabled for that. Interventions, will only be cited in a minutes of the meeting when it has been requested by the shareholder. The members of the Board of Directors with the President up ahead, are meeting here today in the General Shareholders' Meeting to be accountable for the year 2023 and to refer to the highlights of the year. I'd like to begin this presentation by thanking the employees and all of our stakeholders for the support they have given us in the last 12 months. The constant work of all of our 30,000 employees operating nearly 30 geographies has allowed this company to come back to benefits and profits in 2023 obtaining a remarkable operational result. All that has been achieved in a very changing global framework forcing us to adapt our business model in a scenario characterized by ecological and detailed transition. These are not the challenges has been approached by OHLA in 2023, and we'll keep working on them throughout 2024. [indiscernible] we will strengthen the transformation process of this company. Thanks to the large experience and technical capability of our team and the continuous advancement of our main lines of activity, which are construction and concessions. And also believe in a more sustainable business model and the cross-sectional axes, the promotion of good governance as a main factor to attract talent, capital and investment. All these pillars will be reinforced with a capital increase of EUR 100 million that we have announced to the market, and that will be useful to consolidate the great transformation that we are going through and to foster the great capabilities of the company from the business perspective. OHLA is a company. There is no less in that and stronger from the operational perspective with growing margins and consolidated in its reference markets. These solid foundations are took the family [indiscernible] to reaffirm our commitment to this company in the already announced capital increase. After the announcement of that fees by the [indiscernible] family, yesterday, we received [indiscernible] offers, which confirms a great interest to invest in this company. Ladies and gentlemen, dear shareholders, after the initial reflection, I'll next expose the items that we'll deal with in the general meeting that you may see on your screens. First, we show you the strategic milestones achieved. Secondly, the great transformation of OHLA in the 2020-2023 period. Thirdly, we'll speak about our growth axis. Fourth, our performance in sustainability. Fifth, we'll focus on reinforcing our balance sheet structure. Sixth, we'll present the company results in 2023 as well as the meeting of our targets. And last, we'll deal with agreements that we suggest to the dear shareholders in this general meeting. Next, I'll focus on the strategic milestones that have been achieved by the company in 2023, reflecting its great transformation process, mainly operational transformation and coming back to a track of profits. Likewise, the business has beaten all -- and met all its targets as it has happened year after year since 2021. EBITDA has achieved its best figure since 2015. Hiring and our pipeline are kept. Well, contracts in the pipeline are [ capping ] maximum historical figures and the operational cash flow generated in 2023 exceeds EUR 100 million and [indiscernible] years, and we keep the track of reducing our financial leveraging. Ladies and gentleman, dear shareholders, we are largely meeting our road map and consolidating the transformation of the company. Our last excellent evolution responds to an intense transformation process, as you may see on your screens in order to show you the figures in a sounded manner. Data that will show throughout the whole presentation include the servicing activity. Let me remind you that abiding by the company's decision to rotate these [indiscernible] business, this vision is presented as an interrupted activity in the year 2023. Therefore, OHLA in the 2020-2023 period has increased its sales by about 30% and has more than doubled, its EBITDA has reduced more than 30% is financial debt, its growth leveraging has gone from 11.1x to 3.8x EBITDA. Contracts have grown in more than 60%. And the total pipeline increases in more than 70% and closer to the year 2023 nearly EUR 850 million, which is EUR 8.5 billion. And these figures [indiscernible] this company has get balanced, and we're very proud of that. To reach these relevant figures and keep consolidating them, we have had the following growth axis. OHLA has a diversified portfolio that is expanding in 3 reference geographical areas. The United States, Latin America and Europe. This pipeline contributes to promote the growth of the countries, will be present through carrying out projects of transforming infrastructures. In the case of the U.S.A., we got awarded in 2023, the second largest project of our pipeline. The improvement works in 13 underground stations in New York for an amount of EUR 530 million. Latin America, we enforced our portfolio with new contracts such as the National Institution for Cancer in Chile. And in Europe, we have increased and reinforced our presence with new projects in the Nordics and the Czech Republic. Continuing with the OHLA's growth axis on this sheet, you may see how the retail transformation has become our differential value. At OHLA, we were able to see the potential of technologies such as the 3D models or drones nearly 15 years ago and we are proud to have been at the [ Avangard ] in the usage since then. Likewise, were referenced in the application of the BIM methodology in the building sector, as reflected in the more than 100 projects will be present. And as the third axis about growth. We have the promotion of mobility and sustainable growth. Example of that are the purple line in Maryland, the biggest contract of our pipeline or the Stockholm underground where we were positioned as the bigger -- as the biggest contractor. We also referenced in the Panama underground or we just opened the biggest [indiscernible] station that will benefit more than 300,000 users. This project reflects also with software value for the company. Just like our firm belief in Safety and Health, the Ministry of work and labor development of Panama has considered. So when acknowledging our best label practices in extending Line 1 of the mentioned infrastructure. And that's just an example. I'd like to thank each of these levers because thanks to that, we're contributing to promote a sustainable business, responsible management and social progress. And all of that aligned to our sustainability plan in 2022, 2024, where governance has a main place. In this regard and focusing in the Board of Directors of this meeting, I'd like to highlight that for the first time in the history of the company, independent Board members represent more than 65% of the Board of Directors. Ladies and gentlemen, these shareholders were very proud of the important advancement made in good governance, and we'll keep working on that. And of course, looking at the year 2024, I must say that our priority will be reducing the debt of the company through 2 main levers and plans. First of all, the sale of nonstrategic assets that is assets not linked to our main activities of construction and concessions. In this area, we have the women reached through the sale of our stake in the CHUM Hospital in Canada. It's planned that the closure of the transaction and receiving the funds will take place in the last quarter of the year. To that, we need to add divestment to really announce [indiscernible], our main subsidiary of the Servicing division where we keep working with the family target to maximize its part. Secondly, and additionally to the sale of these assets, we have a capital increase of EUR 100 million that will be subject to the approval of our dear shareholders in a next [indiscernible] meeting. Ladies and gentlemen, with all that, we'll be ready to approach our next structural targets that will force to our future growth. Next, I'll give the floor to Mr. Tomás Ruiz our General Director, who will expand the relation of the company from the operational perspective. After his presentation, the Secretary of the Board will look at the proposal of women's formulated by the Board of Directors.

Thanks so much, the President. Good day, everyone. I'd like to join the gratitude of the President, the Board of Directors to the employees for their continuous commitment with the company and to all of our stakeholders. Next, I'll mention the evolution of the company in 2023 in economic and financial terms. On your screen, you may see the evolution of the main economic parameters of OHLA and now we are beating our targets. Sales are being EUR 3,557 million with a growth of 10.4%. We have exceeded about EUR 200 million, the EUR 3,400 million announced in February 2023. EBITDA reached EUR 137 million, 20-plus percent more than in 2022, representing the best gross exploitation results since 2015. This figure exceeds the EUR 125 million announced reflects the good operational performance of the company. We have reached a record in contracts with EUR 4,495 million awarded. This figure represents about EUR 900 million more versus the EUR 3,600 million announced of the market. Our portfolio, our pipeline in historical maximum figures is reaching EUR 8,500 million in guarantees [indiscernible] contracts the basis of our future growth. To all that, we need to add the boost of the concessions activity line with a new asset on the management in Chile. Dear ladies and gentlemen, OHLA is now a predictable company and these data backs it up. Please let me repeat the evolution of sales and EBITDA have allowed us to reach as the President said, an attributable net result of EUR 5.5 million, comparing very well with the lapses of EUR 96.8 million in 2022. Regarding the evolution of different business lines, the sales of the construction division have amounted to EUR [indiscernible] million, EUR 7.1 million more than in the same period in 2022. EBITDA in that period reaches EUR 147 million growing by 13.7%. We highlight the improvement of the EBITDA margin of the activity at 5.1%, a level that hasn't been reached since 2014. Industrial division concluded 2023 with sales of EUR 205.1 million, 57% more and EBITDA closed at EUR 7.2 million. On the other hand, the main figures of the servicing activity in 2023 are the following: sales of EUR 466 million, EBITDA of EUR 11 million, contracts of EUR 375 million and a pipeline of more than EUR 700 million. [Audio Gap]

With regards to the contracting with regards to the portfolio in 2023, we've reached new records. The contracting was EUR 4,400 million, which was a big quantitative leap from the EUR 2,698 million that were registered in 2019. This contracting represents ratio book-to-bill of 1.3x and it fulfills the internal requirements of risk diversification, both in terms -- in geographical terms as well as in size of the project terms. With that contracting, OHLA has ended up 2023 with the total portfolio of EUR 8.485 billion, a 20.6% more compared to what we had at the closure of 2022. The construction contracting reaches the EUR 3.8 billion, close to 80% of them has been carried out abroad. And now we're going to show you one of the milestones that we were able to achieve in 2023. Cash operated generation of more than EUR 100 million change in the trend that we had in previous years. We've come to a turning point in the company when prioritizing the measures that have adopted and that improve the management of the circulating capital and continuous improvement on the management of the margins. And this is being fruitful. Without a doubt, we will continue on maintaining this trend, the same way that we will reduce our leverage. Our commitment in reducing indebtedness is -- will still be decisive in order to maintain sustainable growth. It is important the path that we followed since 2020 that our President has already mentioned. At that time, we have a gross leverage ratio over the EBITDA of 11.1x and we've closed 2023 with a ratio of 3.8x. In that line, I have to indicate that as of today, and after announcing the divestment of our participation in the CHUM Hospital in Montreal, Canada. And after having received the last payment corresponding to the sale of the old office, where in a pro forma ratio of our indebtedness, gross in financial indebtedness of around 3.1x. Ladies and gentlemen, this company is moving at the right pace, at a very sound pace. The capital increase that has been announced in the last stage in the renewal process of OHLA. That has maintained during the last years, a 2-digit growth pace in most of the financial areas. This reinforcement operation of our balance will help us to consolidate these and support concessions, which is a strategic business line and whose growth will strengthen the value of our company. Thank you very much for your attention. Now I give back the floor to our President.

Thank you very much, Tomás, for your kind intervention. Secretary, could you please start with the reading of the questions and interventions that we receive in due form and time.

Mr. President, we have not received any request from the participating shareholders remotely. Therefore, Mr. President, we can continue on once this intervention turn has finished. Now we're going to present the assembly, the proposal of agreements that the Board of Directors has formulated, the literal and integral text has been given to the notary, and we will summarize -- we will read the summarize at the same time that he proclaimed the results of the voting.

Secretary, yes, we proposed 9 agreements. The integral text has been given to the shareholders together with corresponding justifying reports in the calling of this general shareholders meeting. Out of these points [indiscernible] then have the consideration of ordinary agreements. The first 5 of them have to do with our yearly financial report, the exercise of 2023 and the reelection [indiscernible] as the auditors of the corporation and the group for 2024. And the agreement has do with the consultative voting of the report of the remuneration of the Board of -- members of the Board during 2023. Apart from this agreement in the seventh point, we inform about the modification of the bylaws approved by the Board of Directors since the last general shareholders' meeting that took place very specifically, the Article 5 of the regulation of the Board of Directors with the purpose of agreeing the delegation of faculties to internal scheme that was approved by the group. On the eighth point, we tackle in the General Shareholders Meeting the request of the Board of the members, the faculty of dedicating the issuing of values -- fixed income values that are convertible into shares that could be issued in the next 5 years. This request of delegation requested to this [indiscernible]. Complete the legal faculties that Board of Directors have of issuing nonconvertible [indiscernible] according to the legislation for corporates. And that was approved by the general shareholders' meeting in May 28, 2019, for a period of 5 years that came to an end last May 28. The company does not intend in the short term using this delegation that is being requested by the Board of Directors considers convenient to have such capacity in order to issue this type of obligations, convertibles during the maximum period of time that is legally foreseen that is to say 5 years so that they are always in the right situation to capturing the capital markets, whatever funds are necessary for the appropriate management of the social interest, which, on the other hand, is something that happens very often in listed companies. Finally, in point number 9, it is proposed to approve the delegation of the necessary faculties for the formalization of the agreements that could be approved by the general shareholders. Thank you very much, dear Secretary, concluded a period to issue your [indiscernible] to the proposals included in the points in the agenda that was done telematically by the Secretary, we give -- we are going to read now to a small summary of each one of the agreements and the result of the voting. After the -- examined the approval of the individual yearly accounts, the balance sheet, the P&L account, the state of changes in the net equity, the flows. The system management report corresponding to the year 2023 of Obrascón Huarte Lain S.A. consolidated firm. We have to approve the yearly accounts, integrated the balance, the P&L account, the state of the changes on the net equity, the state of the flows in cash and the memory as well as the management report corresponding to the year that finished in December 31, 2023. We have 175 million votes in favor, 52,000 of abstention and 5,390 votes against. Therefore, the proposal is approved by majority. The second agreement is to examine the approval of the state of nonfinancial information that it is part of the management report consolidated and that corresponds to the year 2023. As we were saying before, the system -- appropriate summary of the agreement. We have 174,882,012 votes in favor, 352,138 abstention and 7,290 votes against. So therefore, it is approved by full majority. The third one is the examined approval in its case of the proposal of the application of the result of 2023, the proposal of the Board of Director is to apply the negative result of the exercise of EUR 47,046,973,030 to the negative results of previous years. We have many votes in favor [indiscernible] extension and 10,000 votes against. Therefore, it is approved by majority. The fourth agreement is to examine the approval is appropriately management of the Board of Directors during 2023. In this case, Dear President, we have 174,868,632 votes in favor. 378,340 abstention and 11,000 votes against, therefore, approved by majority. Then fifth agreement is the reelection of the court of the auditors of the corporation and the consolidated group. The Board of Directors prior to the Committee of auditing and compliance propose reelecting Ernst&Young, S.L. as the auditors of the accounts of Obrascón Huarte Lain and the consolidated group from the period that goes from January 1 and December 31, 2024, according to Article 264 of Corporate Law. We have 174,850,038 votes in favor, 382,361 abstention and 19,000 votes again, therefore, approved by majority. Sixth agreement is the consultative voting of the yearly report and the remuneration of the members of the Boards corresponding to the year 2023. In this case, we have 166,000,393 votes in favor, 681,000 against and [indiscernible] and so it is approved by majority. Seventh, this is an agreement that it is not subject to vote, which is the report on the modifications of the regulation of the Board of Directors approved by the Board of Directors of the corporation. In this case, we provide the information to the general shareholders meeting of the modification of the regulation of the Board of Directors according to the report of the Board of Directors made available to the shareholders. The eighth agreement, which is very [indiscernible] and has to do with the delegation in the Board of Directors on the faculty of ensuring obligation bonds and other fixed income values, convertible in shares as well as warrants and when there were other financial instruments that give the right to the subscription of newly emitted shares of the corporation, delegating the Boards of Directors, the faculty of excluding the preferential subscription right. This agreement will consist in delegating the Board of Directors of the corporation according to the general regime of the issuing of obligations according to what is stated in Articles 286, 297, 414, 417, 510, 511 of Corporate Law and article 319 of the regulations of the business registered the faculty of issuing these negotiable shares convertibles according to the terms and conditions included in the proposals of agreement published in the calling that is included in the website of the company and due to the extension with permission of the pursuant will be taken as read. So we're going to read right now the result of the voting of this agreement. [indiscernible] agreement, it's 159,111,470 votes in favor, 7,485 abstention and 16,123,585 votes against, therefore it's approved by majority. And finally the ninth agreement, which will explain whether -- or it will publish the previous agreements in the business registered and we delegate to the Board of Directors, the faculty of providing the agreements that have been given and they give the faculty to the Chairman, Secretary -- of our Secretary, so any one of them with the attributions that are appropriate according to the law, they can go to a notary to make publicly agreements that having adopted and to do whatever manages necessary until they are fully registered whenever necessary in the public registers that correspond as well as the posting the yearly accounts the business register and provide, if necessary, that whatever clarifying documents to the initial ones, requesting the partial registration according to what it's qualified by the business [indiscernible]. In this case, we're having 174,873,800 votes in favor, 350,220 abstentions and 8,023 votes against, approved by majority. Therefore, all of the agreements subject to this general shareholders meeting have been approved. Thank you very much, dear shareholders for your participation to this general shareholders meeting, and thank you very much for the trust. [Statements in English on this transcript were spoken by an interpreter present on the live call.]