Sacyr, S.A. ($SCYR)

Good morning. I'm Pedro Siguenza, Chief Executive Officer of Sacyr. Joining me today is Carlos Mijangos, the company's Chief Financial Officer. Thank you all for attending Sacyr's earnings call for the first quarter of fiscal year 2026. I will begin my presentation by addressing the key financials for the quarter. Revenue increased by 5% compared with the first quarter of 2025, reaching EUR 1.116 billion. EBITDA rose by 9% to EUR 327 million, representing a margin of 29.3%, 90 basis points higher than in Q1 2025. Operating cash flow amounted to EUR 223 million, up 12% year-on-year, excluding the impact of the sale of the Colombian assets. These financial results demonstrate that the new awards now entering operation are replacing the contribution of the assets divested in Colombia that are no longer in the company's perimeter. Net profit attributable to the parent recorded a strong increase of 40%, reaching EUR 38 million. Net recourse debt remained below 1x, maintaining a solid financial structure and delivering on our financial commitments. Amongst the most significant milestones of the quarter, I would like to highlight the award of the Ontario Science Center in Toronto, our first concession in Canada. This 30-year concession will deliver what is set to become one of the country's most iconic buildings and will undoubtedly transform Toronto's skyline. It could be one of the most advanced science outreach centers in the world. With this award, for which a EUR 645 million contract is already underway, we are taking another important step in delivering our 2024-2027 strategic plan by expanding our portfolio, as timely committed in English-speaking countries, where we are currently bidding for major opportunities and expect to secure further awards. Sacyr's Board of Directors has resolved to submit for the approval at the annual general shareholders meeting to be held on June 4, a shareholder remuneration proposal consisting of 2 cash dividends totaling EUR 0.15 per share, EUR 0.10 payable in July and EUR 0.05 payable in January 2027. Given that a scrip dividend of EUR 0.049 per share was already paid in January this year, the total shareholder remuneration to be distributed in 2026 will amount to EUR 0.149 per share, 21% higher than in 2025. If approved by the shareholders' meeting, total cash dividends distributed in 2026 will reach EUR 81 million, more than double the cash dividend paid in the previous year, in line with the commitment set out in the strategic plan to distribute at least EUR 225 million in cash during the 2025-2027 period. At Sacyr, we pursue a clear purpose to develop transport, health care, and water infrastructure that contributes to building a globally sustainable future. Our strong positioning in the leading international sustainability ratings recognized by independent agencies such as S&P Global, Sustainalytics, and EthiFinance as a sector leader, #1 in Spain and among the top 10 companies worldwide reflects an integrated ESG management approach that drives sustainable growth and creates value for our shareholders. I will now hand over to Carlos Mijangos, who will provide you with a more detailed review of our operating and financial performance.

Thank you, Pedro. We will now review the company's operating and financial performance. In Q1 2026, Sacyr delivered clearly positive operating and financial performance, in line with the priorities set out in the strategic plan and supported by the strong performance of its concession assets. Revenue reached EUR 1.116 billion, accounting for a 5% increase compared with the same period last year. This growth was accompanied by an improvement in EBITDA, which stood at EUR 327 million, up 9%, but maintaining an EBITDA margin of 29.3%, almost 1 percentage point higher than in the first quarter of 2025, reflecting greater operating efficiency. Net profit attributable to the parent increased significantly by 40%, reaching EUR 38 million. This positive performance was mainly driven by stronger operating results and an improvement in the financial result with no material extraordinary impacts of asset rotations having been reported over the period. In terms of cash generation, operating cash flow reached EUR 223 million, accounting for a 12% increase against the first quarter of the prior year on a like-for-like basis after excluding the contribution from the assets sold in Colombia last year. This level of stable and recurring cash generation once again highlights the company's ability to create sustained value in a demanding market environment. And finally, net recourse debt remains below the limit set out in our strategic plan. From a financial standpoint, during Q1, the refinancing of the corporate syndicated loan was completed, increasing available liquidity to EUR 600 million, improving the cost of debt and extending maturities to 2031. This transaction was backed up by 25 financial institutions and was nearly 2x oversubscribed, reinforcing market confidence in the group's financial profile. Likewise, progress was made in the selective rotation of assets with the sale in April of our parking assets in Spain for EUR 9 million at a multiple of 2x invested capital, that is 26% above the internal valuation presented at the 2024 Investor Day. A key milestone during the period was Sacyr's inclusion in the STOXX Europe 600 as one of Europe's leading benchmark indices. It brings together the most representative companies from 17 countries selected not only for their size, but also for their liquidity, transparency, and financial soundness. This development further enhances Sacyr's visibility and strengthens its positioning within the European investment community. Regarding the company's debt structure, consolidated net debt stood at EUR 6.721 billion as of March 2026, mainly reflecting a solid operating cash generation of EUR 223 million. The effect of net investment during the period amounted to EUR 270 million and the transfer on to Sacyr's balance sheet of the debt previously held at GUPC with no impact on valuation of cash while benefiting from significantly more favorable financing conditions at the parent company level. As for net recourse debt, the most significant factors were the seasonal effect of the negative working capital of EUR 90 million, which will reverse throughout the year; the purchase of EUR 10 million of shares through the settlement of the related forward derivative; and the transfer on to Sacyr's balance sheet of the debt previously mentioned for an amount of EUR 289 million. This figure remains below the committed threshold with a ratio of net recourse debt to recourse EBITDA plus distributions from concessions below 1x, which once again confirms the group's financial discipline. Now we will move on to explain the performance of the different business lines.

Thank you very much, Carlos. I will now provide further detail on the performance of our 3 business areas. The Concessions division reported revenue of EUR 463 million, accounting for a 23% increase compared to Q1 2025. Operating revenue rose by 10%, mainly driven by the contribution from our Chilean assets such as Ruta de la Fruta, Ruta 68 and Ruta del Itata, which more than offset the exit from the perimeter of the Colombian assets. Construction revenue grew by 58%, pushed by progress on contracts such as Ruta del Elqui and Hospital Buin-Paine in Chile, and the Velindre Hospital in Cardiff, and the Buga-Buenaventura Highway in Colombia. EBITDA for the division posted a 7% increase, reaching EUR 184 million. During the quarter, our concessions distributed EUR 23 million, while we invested EUR 16 million, bringing the total equity invested in our infrastructure concession assets to EUR 1.726 billion. On March 1, operations began at Antofagasta Airport in Chile. I would also remind you that in the United States, we have been shortlisted for 3 managed lanes projects, the I-285 managed lanes in Atlanta, the I-24 managed lanes in Nashville, and the I-77 managed lanes in Charlotte, with bid and proposals for the first tool set to be submitted this summer. In the Engineering and Infrastructure division, revenue increased by 3% to EUR 712 million, driven by progress on projects in the United Kingdom, Chile, and Spain, which offset the completion of works in Peru and Portugal. EBITDA rose by 8% to EUR 127 million. Construction margin remained stable at 5%. The division's backlog increased by 4% compared with December last year, reaching EUR 12.996 billion, of which more than 73% corresponds to our own concessions division, thereby limiting -- as we have repeatedly stated -- our exposure to the inherent risks of construction activity. Among the main milestones of the quarter, we would like to highlight the following: a strategic alliance with local company build to promote projects in Australia, where we are developing the design of Peel Hospital awarded in January and where we have also been selected as one of the 2 finalists to design and build the new Brisbane 2032 Olympic Stadium. The selection of Sacyr as one of the companies to develop the ambitious program of the National Health Service, with a budget of GBP 37 billion over 12 years, with the first contract expected to be awarded shortly in the U.K. Finally, in Louisiana, we began the construction of the I-10 Highway, which is our first infrastructure project in the United States, EUR 2.3 billion in investment. Finally, our Water division continued to deliver double-digit growth in the first quarter, both in revenue and EBITDA. Revenue totaled EUR 76 million, up 19%, while EBITDA increased by 21% to EUR 16 million, posting a margin of 22.4%. The quarter milestones include the following: the acquisition of Aigues de Esparraguera in Barcelona, which serves 23 (sic) [ 23,000 ] inhabitants and reinforces Sacyr's strategy to grow across an integrated water cycle in this case in Catalonia. The award of new contracts in Spain for a total amount of EUR 84 million in Huelva, Tenerife, and Madrid. In April, the concession contract for the Coquimbo desalination plant was formalized. Let me remind you that this is the first desalination plant under a public concession model tendered in Chile with an investment of EUR 305 million and a duration of 21 years. It's EUR 1.3 billion backlog is not included in the figures. It was signed after the quarter end. Total equity invested in this division reached EUR 137 million. In closing this presentation, I would like to leave you with four key messages. First, the increase in the cash dividend for 2026 to EUR 0.10 per share from EUR 0.045 last year, subject to approval by the annual general shareholders meeting, in line with the shareholder remuneration commitment set out in our strategic plan. Second, our operating growth resulting from improved performance across our key financial metrics confirms that our concession-based business model is becoming increasingly stronger, more scalable and more profitable. In this regard, I would note that we are already working on the updated valuation of our assets, which we will present with our half year results in July. As announced in February during our previous earnings call presentation, by the end of this year and depending on the outcome of the major tenders in which we are currently bidding, we expect to be in a position to present a new strategic plan for the company as the current 2024-2027 plan will have been delivered 1 year ahead of schedule. Third message, a new concession award in an English-speaking market, the Ontario Science Center in Canada, in line with our commitment to ramp up the weight of our portfolio in these countries, where we are competing for major ongoing tenders. Finally, proven financial strength supported by the refinancing of the syndicated loan and a net recourse debt ratio that gives us significant strength to meet the challenges ahead. We are now available to answer your questions.

Good morning, everybody, and thank you very much for attending this quarterly earnings call of Sacyr. We are going to start with the Q&A session now. We are going to start with the questions over the telephone. And afterwards, we will allow questions through the webcast chat. Luis Prieto has the first question from Kepler Cheuvreux.

I have two questions. The first question is the following. What happens with the current inflationary context? How does this affect the tenders you will be presenting? Are there any measures in order to mitigate the current risks? And could you give us some color as to the awards of the projects where you have been shortlisted? The second question, could you please give us an update on the Pedemontana valuation?

As for Pedemontana and its rebalancing, this is a clear cut contract worldwide, as we mentioned in the past. The economic financial balance on this award was conducted twice. And this time line is quite normal in Italy. As for increased inflation and in connection with the managed lanes contracts, in the case of Georgia and in Tennessee, we will be submitting proposals in July, should no delays take place, that is to say, before the summer break. There are already some mechanisms in place in order to mitigate any inflationary fallout. And the contracts in terms of concession and construction, we have some models whereby such risks have been mitigated.

The next question is from JB, Miguel.

I have three questions. The first question is concerned dividend. You mentioned the EUR 0.15 per share. So you said that you were going to pay EUR 225 million until 2026. Are dividends going to be paid out in cash as of now? Or will there be any changes going forward? Could you give us some color as to provisions allocated over the quarter, which are a bit higher compared to 2025, especially in terms of the holding because I believe that this accounts for about EUR 40 million? As for the asset valuation that you're going to be reporting in July, inflation and exchange rate performed better than initially expected in 2024, and that would be beneficial. However, the traffic of some intangible assets such as in Italy was quite positive. Therefore, could you please give us some color as to whether the performance of these concessions proved to be better than initially expected back in 2024?

Miguel, let me address your question concerning the dividend. The Board has resolved to submit to the AGM, the approval of the payment of 2 dividends in cash. The scrip dividend is a tool that the Board of Directors can resort to and it can decide afterwards whether it will be used in that tool or not. And as for the allocation of provisions in the current uncertain context, the company has decided to take a prudent approach. That's why we have EUR 40 million in provisions at a holding level. But this is something that we have done in being prudent and conservative in our approach. And as for, of course, traffic and increase that increases the valuation of assets in Italy, of course, performance was better, and therefore, our valuation of the assets in Italy will also rise.

Thank you very much. There are no further questions over the phone. We now give away two questions from the webcast from Bernstein, Victor Acitores, he's asking whether we can give some color as to the timing of water-related projects in Australia. The second question is concerned with managed lanes. What about Sacyr's competitive positioning and our consortium compared to our competitors' peers? We will get back to you in a minute, Victor.

Victor, as for the water-related projects in Australia, as you may know, we have been shortlisted for one water plant in Brisbane. We have already submitted our proposal for this tender. We believe that this project will be awarded this year. And then we will be submitting another proposal for another desalination plant, and we believe that a final decision will be made before year-end. As for managed lanes tenders, Sacyr has been developing concessions for more than 30 years regarding highways. We have been working in the United States for the past 10 years with a hit ratio which is quite high in terms of tender awards. Therefore, we are competing on the same footing as other peers. In Atlanta -- there are 2 groups in Charlotte and Atlanta, 3.

Thank you very much, Pedro. Alvaro Navarro from Bestinver has another question. He's asking about the Pedemontana rebalancing status. And in this connection, he says whether after this rebalancing takes place, the project might be refinanced so whether we are working on it. Another question is concerned with some guidance concerning distribution for concessions going forward in 2026 and equities to be invested. And the third question is connected to managed lanes. Should a managed lane be awarded after the summer break, when are we going to be injecting the first equity? And should we be awarded 2 or 3 managed lanes, which financing lines are being factored in by the company? Alvaro, we'll get back to you in a minute.

Alvaro, as for Pedemontana Veneta, the refinancing of the Pedemontana project is something we are working on regardless of the contractual entitlement we have. We are not working to get refinancing of this asset. As for equity redistribution, Carlos?

You know that last year, we reported more than EUR 200 million for both. So it's going to be about EUR 190 million, EUR 200 million. So we will be able to pay for these obligations according to the money we get from assets. We are still tendering other projects. So this is a very important strategy, how we manage funds and how we allocate them. For the time being, we cannot provide you with a final answer. However, for I-10, we are going to be doing this and the first equity is being paid 4 years after the contract was formalized.

The next question is by Tom Zhang from Barclays. And he's asking about cash flow conversion or EBITDA conversion. It was reduced over the first quarter. He believes that this is due to working capital to begin with and to the sale of the Colombian assets, which no longer make a contribution. He's asking how we expect this conversion ratio to perform over the year. And second, the impact this could have on our cash flow. He's talking about the sale of assets in Colombia. We will get back to you in a minute, Tom.

As we repeatedly mentioned, Sacyr has financial assets. And once assets are operational, cash flows are above EBITDA. We have already sold 3 operational assets. Therefore, the ratio is above 100%. And the opposite happens when you carry out any deductions. This conversion ratio depends on seasonality. As you are saying, this affects working capital, but not only that, there are certain projects that are paid quarterly or have yearly showing some seasonality. This ratio will, therefore, be improving over the year. And usually, the last quarter is the best one in terms of cash flow performance. But all the same, the figures are expected to remain as usual. As for the impact of the sale of assets in Colombia last year, we mentioned that we will no longer receive EUR 180 million or EUR 200 million in EBITDA and cash flow. And this quarter, we didn't receive EUR 40 million as a result of that. Nonetheless, we continue to generate more cash flows as a result of the operation of other assets that have become operational and have replaced the sale of assets in Colombia.

There are no further questions over the webcast. However, we have one more question over the phone from Miguel.

I would like to know about the debt concerning Panama. I believe that it was supposed to fall due this year. Could you give us an update in this respect? Do you think that you could still recover something from this project? When should we expect any updates?

We have managed debt effectively. All consortium members have done so. So right now this debt was supposed to fall due in March. Rather than extending the debt and project terms and conditions, we decided to transfer this over to the holding that can negotiate better financing conditions. Therefore, that is the financial efficiency in other times. As for the arbitration procedures, we are not waiting -- sorry, Pedro will give you an answer on this.

Well, some public hearings were held in January, February, and March, and we expect some final decisions to be issued by the end of this year. So we believe that we will be able to report on this in early 2028. In the results, however, we have a neutral or positive effect because we have allocated provisions for this all.

There are no further questions either over the phone or the webcast. So now let me give the floor back to Mr. Pedro Siguenza.

Thank you, Alberto. If there are no further questions, we thank you for your attendance and interest, and we look forward to welcoming you again at our next results presentation. Thank you very much, and have a nice day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]