Webuild S.p.A. (WBD) Earnings Call Transcript & Summary

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Webuild First Half 2024 Financial Results Conference Call. Our call today is hosted by Pietro Salini, Chief Executive Officer, together with Massimo Ferrari, General Manager, Corporate and Finance. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pietro Salini. Please go ahead, sir.

Good morning, everyone, and welcome to our conference call on Webuild first half 2024 results. I'm Pietro Salini, Chief Executive of the group; and with me is Massimo Ferrari, our General Manager. Let us start with Slide 5. Before diving into the first half results, allow me to take a moment to thank all the people who work with us. I've said that in the past, and I'll keep saying it. Our achievements are due to the day-by-day efforts of our team. I'm talking about 90,000 individuals working together, representing over 150 nationalities, with nearly 40% ages under [ 50 ] -- 55, sorry. I wanted to expand my thanks to all the strategic shareholders including CDP equity, Intesa Sanpaolo and Delfin, who supported us through a crucial moment in the history of the group as well as our minority stakeholders. I would also like to renew my gratitude to those who collaborate with us and believe in our values, especially the Italian international financial institutions and last but not least, our partners, clients and the nearly 20,000 companies of our supply chain. Now let's talk about our first half results. The results achieved in the first -- in this first month of 2024 speak for themselves. A year ago, we started a path that led us to where the group is today. Since Progetto Italia, we have delivered on many fronts, with the risk in our business, we deleverage our financial structure and see the opportunity in a growing market, all thanks to our strong expertise and capabilities. We have managed to achieve strong results semester after semester. Notwithstanding the challenges that we faced in recent years. I don't need to remind you of the global pandemic, supply chain bottlenecks, geopolitical tensions and macroeconomic headwinds, such as inflation and respective monitory policies. Since the beginning of this year, we won more than EUR 7.5 billion worth of new orders. This translates in a new record backlog of EUR 65 billion. Of the total EUR 56 billion are related to construction projects and fully cover our 2023-2025 revenue and EBITDA targets. The next business plan we start with a more than comfortable new backlog. At an operational level, we closed the first half of the year with double-digit growth. Revenues grew by 20% to EUR 5.5 billion. That is more than what we registered for an entire 12-month period just 5 years ago. Meanwhile, EBITDA grew by 41% to EUR 407 million. The net income is 3x as much as the amount registered in the first semester of the last year at EUR 82 million. On the financial side, we kept deleveraging while maintaining a solid financial position. We came out with a net cash position of EUR 1.4 billion, positive for the fourth semester in a row. The gross leverage at a level below 3x, far better than the average among our peers. Turning to Slide 6. We have consolidated our development, becoming bigger, stronger and safer. The overall market is strong with infrastructure investment programs being implemented in a number of countries. The industry is evolving and so is the customer mindset. This is presenting us with significant opportunities. There is a sense of urgency to develop infrastructure in response to the global trends in energy and climate transitions. Infrastructure will be a crucial investment. When current geopolitical tensions will be solved as well as they are now to improve people's lives. We are what clients need in dealing with the challenges posted by these trends. We are an undisputed global player in the construction of large complex civil infrastructure. For more than 100 years, we have been exporting engineering excellence all over the world. We are a global leader in the water infrastructure sector and rank among the top 10 players in sustainable mobility infrastructure. And we continue to deliver on our consistent strategy focusing on margins and cash generation. These targets are built on three pillars: number one, focus on building highly complex and innovative infrastructure in order to remain a reference partner for our clients worldwide. Number two, consolidate our leadership positioning in core markets such as Europe and Italy, Australia, United States and Middle East. Number three, gain scale so we can invest in different strategic projects. Scale allowed us to continue investing in innovation and safety of our people. As we have previously mentioned, health and safety is a priority for the group, also included in our targets. In 2023, we successfully managed to reduce the lost time injury frequency rate to 2, and we are continuing this trajectory also in 2024. This has been possible, thanks to intensive programs, with more than 400,000 hours of training on health and safety only in the first months of 2024. There are also many other initiatives to engage both employees and subcontractors. When comparing our injury rate to those one of the -- our main European peers, it is evident that we are the best in class. But we will not be satisfied until the injury ratio is equal to 0. Today, we have the platform, the right governance, centralized processes and effective procedures to seize the many opportunities ahead of us. We also have the possibility to expand in new segments and the scope to continue improving margins and cash conversion rates. In Slide 7, we want to show you our ability to deliver projects to our clients. We can proudly say that the record-breaking numbers that we continue to register are the result of the year of commitment, innovation and passion for what we do. This confirms us as a trusted and global trader in the sector. Since 2012, we have delivered more than 270 complex infrastructure projects worldwide. This is a key point for insurance and other financial players are supporting our business as it shows a low operational risk. In the last 4 years, we completed projects that improve the lives of present and future generation in many countries. These include metros, bridges, dams and hydroplant. We are talking about the San Giorgio Bridge in general. It has also become a model of efficiency and collaboration. In Italy, we delivered the New Eni Headquarter in Milano. Abroad there is a Cityringen Metro Denmark, the Forrestfield Airport Link in Australia, the Al Bayt Stadium [indiscernible] in the fifa world cup in Qatar. And the Long Beach International Gateway in the United States. In the first months of the year, works continue to progress with the excavation of the Grand Paris Express, Metro Line 16 tunnels and the delivery of the first section of the railway between [indiscernible] stations in CSC. In the last week, it has been inaugurated the new earth station for the Metro Line 6 in [ Naples]. In December, we will deliver the entire metro line for in Milano. This confirms our commitment to complete the project responding to client needs. And this is a key attraction for clients, we see -- want to see infrastructure completed in time and serving people at [indiscernible]. A few weeks ago, we submitted a revolutionary project for restructuring Milano and Siro Stadium. The realization of the project, we will have incorporating in [ practice ] means for the two football clubs and for the city having one of the best areas that holds its own in respect of the international high-quality standard space. On Slide 8, you can see our scale is allowing us to better phase advents and successfully manage the labor shortage and supply bottlenecks. This was made possible through the industrialization of the entire value chain. Together with more than 19,000 companies, we have adopted advanced technologies and automation to reduce costs and improve the quality of our work. When clients come to the market looking for an infrastructure player, our ability to mobilize large workforce is a plus to them. We almost reached the threshold of 90,000 people globally. And we expect further 36,000 people to be hired by 2026, of course, with some people leaving our job sites. In Italy, the increased investment in infrastructure have resulted in a search for enough skilled labor to do the project. As a consequence of this, we created training schools under the Cantiere Lavoro Italia program. Which we designed for trucks and training people. We expect to hire 10,000 people within 2026 in the country. The program is expanding, especially in the Southern region. As part of the Cantiere Lavoro Italia, as the fast training port for upskilling tunnel-boring machine pilots with aid of a TBM simulator. As you know, the group is a global leader when it comes to tunnel link, and we are also among the leading operators of TBM. In accordance with the principle of a circular economy perspective, we set up a new company called Webuild Equipment and Machinery that will renew used tunneling boring machine so that they can deploy it again on new projects. Thanks to our centralized management of the supply chain, we have been highly effective in addressing bottlenecks. We invested in various innovative solutions like a new robotic free cash segment plant inaugurating 2024. It was the first of its kind in France, aimed at boosting productivity while ensuring safety at construction site. Today is [ Novaga ] is a crucial strategic element for delivering large complex infrastructure and at some time, ensuring safety of the workers. Among the innovative solution we implemented there is a -- for instance, the hyperbaric escalation pioneering a sustainable technique introduced for the first time in Italy. It involves using compressive air for [indiscernible] in the presence of water, ensuring the highest standard in FM safety. Turning to Slide 9. Let me show you how we are leveraging our competitive capacity consistently benefiting from the continuously expanding infrastructure market. I want to remind you that we came from a very strong order intake since 2021. We are talking about a total worth EUR 57 billion in the first half of 2024, we are confirming this positive trend with EUR 7.5 billion of new orders already secured. This means more than 65% of those expected for the full year 2024, with over 95% of it coming from key markets with low-risk profiles. The order intake includes around EUR 500 million of contracts for which we have been identified as preferred repeater. Most new orders come from outside Italy, such as Trojena projects in Saudi Arabia and the Western section of Line 15 of the Grand Paris Express in France. We have also been selected in joint venture as preferred bidder for contract on massive rail projects in [indiscernible]. The high backlog, we have tided up fully covers current business plan, giving room for further order intake [ selectivity ]. The geographic distribution of the order backlog enhances our reliance against temporary shock that may affect one region or another. More than 85% of the amount come from low-risk markets. Italy takes the biggest share of 44%, followed by Australia with 17%. As described in the last call, we are experiencing a paradigm shift into the sector. This changes the attitude in delivering the project, derisking as well as our backlog. First, price is no longer the main criteria for winning bids. Competition on technical solutions, health and safety standards is increasing in Europe, including Italy and Australia. Indeed, most new orders in the last few years have been acquired because of a better technical offer, leading to better marginality at product level. Second, most of our order backlog has price revision formula to mitigate inflation risk. In Italy, the new procurement code for the [indiscernible] Italia, introduced some key topics for the reliance of the sector. For instance, the obligation to include price review process, the acceleration of payment methods and the provision for contractual advances up to 30%. In addition, it has been introduced a collegial body so-called collegial [indiscernible] for the prompt resolution of disputes that otherwise may slow down the regular work execution of [indiscernible] project. Third, in the last years, we have successfully adopted a new contract standards, which imply lower operational risk. For example, the progressive design and deal used mainly in North America is a contract base of a strong collaboration between the client, the contractor and the designer. All parties are involved early in the design and planning process in defining the budget for the project, meaning lower execution risk in construction phases. I now leave the floor to Massimo for the financial details.

Thank you, Pietro, and good morning to everybody. Let's start from Slide 11. Here, we want to give you an overview of the infrastructure market, the construction and engineering sector will remain strong for many years to come with this expansion driven by public and private investments. It would be at a rate that is far greater than GDP growth. It is undeniable how much infrastructure investment acts as a catalyst for GDP growth, therefore, is essential for the public debt sustainability. The world is changing rapidly and governments need to face challenges in an effective way. The investment in infrastructure is helping to face mega trends such as population growth, water and resource scarcity, climate change and energy transition. And we have a wide range of solutions to help them from railways and metro lines to bridges to connect people from desalination and water treatment plants to hydro energy storage schemes. What we do improves the lives of millions. Digitalization is also an opportunity. We are following closely, in particular with data centers expansions. Before I go through the results, let me remind you that as is customary, we are presenting adjusted figures to represent the recurring performance of the business. You can find details of the adjustment to you we made in the appendix. Now let's move to Slide 12, where you can see how strong our operating results are in the first half of 2024. We generated revenues of EUR 5.5 billion, an increase of 20% versus the previous year. This was driven mainly by projects in Italy and Australia. As Pietro mentioned earlier, these results are even more exceptional when compared to 5 years ago. The revenues and margins we have recorded in the last 6 months are higher than the results achieved for the entire 2019. EBITDA increased by 41% versus last year to EUR 407 million, reaching a margin of 7.5%. This is primarily thanks to the execution of the group's high-quality order backlog and a higher absorption of corporate costs. It is also because of the renegotiation of contracts in the second half of 2023, and the implementation of efficiency initiatives. Other factors include contract management with new formulas for less operational risk and closest covering inflation risk helped our marginality as well. EBIT rose by 63% to reach EUR 226 million, results are on track with our guidance with sustained growth in terms of revenues and margin. Going to Slide 13, let's take a look at revenue distribution. Our activity is well balanced with more than 90% of revenues coming from low-risk countries. Italy represents our main market with 35% of revenues. The main contributors to this increase are the high-speed railways that we are building across the country. Italy has changed a lot in recent years. Many investments in infrastructure have been launched and clients have adopted a more collaborative approach. Let me remind you that about 80% of the revenues comes from project not related to Italian funds linked to next-generation EU programs. As Pietro will tell you later, there are many opportunities in Italy even after the PNRR. But Italy is only one part of our business, which is truly global. We still generate 65% of our revenues outside Italy. Australia is our second biggest market with 24% of revenues coming from the continent. In North America, where we operate mainly through [ Lane ], our subsidiary, we generated 13% of our revenue. And in Europe, we get 9%. Activity in this region was focused on France, Norway, Romania and Switzerland. Middle East contribution to the total is around 9%. When it comes to revenue distribution by activity, more than 85% is related to projects that contribute to achieving sustainable development goals defined by the United Nations. We have been confirmed as the global leader in the water sector and we rank amongst the top 10 for the construction of sustainable mobility project. On Slide 14, we have the P&L below the EBIT line. we posted a net income of EUR 82 million. It's more than 3x the level reached in the first half of 2023 at EUR 23 million. Net financial costs decreased by EUR 21 million. The positive effect is linked to the increase in financial income at EUR 81 million up by about EUR 50 million, mainly thanks to bank interest on cash stock. Financial expenses are EUR 134 million, an increase of EUR 23 million versus 2023. The rise in net financing costs is mostly due to the higher cost of debt on bonds. This has been partially compensated by lower bank charges, thanks to a better management of RCF lines in first half of 2024. At the bottom of the slide, you can see the reconciliation from reported net profit that amounted to EUR 54 million to the adjusted one. The adjustment refers to accounting nonmonetary items, such as EUR 20 million for the amortization of the positive bargain we registered in 2020 relating to install this acquisition and EUR 7 million relating to the [ Clough ] acquisition. Moving on the next slide, we would like to show Webuild positive credit trajectory, highlighting the main balance sheet items. As we have said many times, cash generation is a key part of our business plan. We ended up with a historical net cash position in December 2021 for the first time. We have then managed to maintain it positive. We have currently a strong net cash position at EUR 1.4 billion, which is a EUR 1 billion improvement versus our previous net cash balance at June 2023. Working capital management continued to play a key role in the first months of 2024, serving as one of our levers for cash generation. This comes, thanks to our strong commercial activity, but also several measures put in place to manage efficiently working capital. The good results have also been reflected in the improved credit metrics as evidenced by the constant downward path of gross leverage, down to 2.8x in June 2024. This is net of a temporary effect linked to the liability management we will discuss in the next slide. This is a result that has come from an almost stable gross debt in recent years, while group grew exponentially. On Slide 16, we show the main numbers of our corporate debt and the liquidity profile with the new bond issued in June, we successfully refinanced -- the bond expired in October '24 and partially the 2025 one. The liability management consisted in the issue of a bond for EUR 500 million and a tender offer, which came out with EUR 71 million repurchased on the 2024 notes and EUR 271 million on the 2025. The remaining cash raised from the new bond will be used to repay the receival 2024 notes at maturity. We ended June 2024 with a comfortable exceptional liquidity position of more than EUR 4 billion including EUR 970 million of undrawn RCF lines. Almost all of our corporate debt is at fixed rates with an average cost of about 5% and a duration higher than 3 years. In the last 2 months, our rating outlook has been improved by both Fitch and Standard & Poor as Pietro talked before, if there is one thing that comes out of this rating reviews, it's that our growth and the trajectory remains positive and very visible. Both rating agency revised our outlook to positive from stable affirming that the rating at BB, according to Standard & Poor, the revision of the outlook reflects the view that it could raise the long-term operating to BB+ over the next 12 months if the group sustains resilient EBITDA margin and free operating cash flow to debt. This would be supported by continued order intake and further improve cash flow generation. Fitch also valued well our solid business profile, defining it as being in line with an investment grade engineering and construction company. It also cited our strong order book and a healthy pipeline and project opportunities. I will now leave the floor to Pietro for a look at the market dynamics and some closing remarks.

Thank you, Matthew. Let's start with an overview of our commercial pipeline. What we are seeing is a very promising market with many opportunities. As you can see on Slide 18, our commercial pipeline remains strong at more than EUR 90 billion compared to the global market estimated at more than [ EUR 50 trillion ] for the next 4 years, it seems like a very small share of it. It makes us confident in the soundness and durability of the market for the coming years. Given the role of infrastructure as a catalyst for growth, various government in key countries have launched multiple investment plans. Investment will be driven not only by traditional infrastructure like rail, roads and so on, but also by energy and smart leading sectors. Based on our strong positioning in our key countries, our commercial momentum is running very well this year. There are EUR 18 billion of bids that we have already submitted and are awaiting an outcome. We are focused mainly on Europe and North America, Australia and Middle East, where we are expanding our activities in segments such as hydro, sports and water treatment plants. Turning to Slide 19. Let's have a look at how we see the Italian market. Our group generates 35% of its revenue from Italy. This is in line with what is held by competitors in their own home market. Here, we are committed to deliver the relevant amount of orders we have acquired in the last years. but many other opportunities are on the horizon. In the coming years, there will be more projects to complete railway such as the Salerno-Reggio Calabria and [ Adriatic Alliance ]. In late June, the European Parliament updated the trans-European transport network guidelines, including many new rail lines with this update will come more funding. We are also expecting investment in metro lines, sports, stadium, hospitals and hydroelectric plant. We are committed to supporting the energy transition. We recently signed an agreement with Alison to develop Pumped hydro energy storage projects in Southern Italy. We are also working to help communities deal with draft. We see opportunities in the water sector. Our subsidiary, Fisia recently won the largest water treatment project in Italy in a decade. Fisia has a long-standing experience in the sector with more than 95 years in the business and is among the most competitive global contractors in wastewater treatment and desalination, particularly in the Middle East. Meanwhile, the data center market is expected to grow steadily in the coming years. Looking at Italy, total investment in 2024, 2028 is seen rising to about EUR 7 billion after 2028, and exponential growth is expected, linked to the spread of artificial intelligence system. And we can leverage on the know-how of our Swiss subsidiary, CFC, which entered the data center market since 2021, is, of course, the Messina bridge, which is not included in our target nor in our folder [ backup ]. Slide 20 gives you another view of our second market by size, Australia. The integration of class, we are now working as a single company. Our backlog in the country is EUR 10 billion with mainly cost plus type of countries. Our projects include the construction of the biggest renewable energy project in Australia, Snowy 2.0 and the largest urea plant in the country to produce fertilizer. We -- just to name a few others, we are upgrading the largest wastewater treatment plant in Western Australia and developing part of the City Metro Airport rail line. Thanks to our expertise and know-how, the group is ready to size a market value at almost EUR 400 billion, including new business segments, such as energy, which is providing a great boost in the medium term. The government Powering Australia plan foresees billions of dollars of investment in energy transition with the aim to make the country a leader in clean energy production. In addition to this, we are further looking at new opportunities in hospital, transmission lines, ports, desalination plant and water treatment facilities. On Slide 21, we show the other two key markets of the group. In North America, we are working on a new hub for an integrated approach towards the American and the Canadian market. which totaled almost EUR 5 trillion of investment in construction. The key driver will remain investment in rail, roads and industrial and energy infrastructure. We recently launched the main U.S. media channel, a campaign called "webuild what American needs". We want to raise awareness of our global leadership into the infrastructure sector and our historical experience in the country, which dates back to the 19th century. Having already built more than 1,000 kilometers of bridges and Biodex globally, we are ready to put our experience to serve the U.S. authorities for the reconstruction of the collapsed bridge in Baltimore. In May, together with our U.S. subsidiary, lane, we presented a concept design for a safer and more innovative reach. Our proposal aimed at speeding up the construction of the bridge, which is crucial for regional mobility. We did the same thing in 2018 when we offer our expertise to build a bridge to replace the one that collapsed in [indiscernible]. We completed that project in just 15 months. In the Middle East, the construction market is expected to reach nearly EUR 800 billion in the coming years. Thanks to our local expertise and historical presence. We are benefiting from significant investment in infrastructure, mainly in Saudi Arabia. Let me clarify that the news that you may have heard about the potential scaling back of the Neom projects are mainly related to the residential part of the job. The Saudi market remains strong. With many investments being made in the capital city Riyadh linked to the [indiscernible] position and FIFA World Cup to be held in 2030 and 2034 respectively. In the Emirates, Qatar and Bahrain, major infrastructure projects are expected to kick off, particularly Metro line in their respective capital as well as high-speed rail lines. We continue to monitor opportunities outside our key markets with our local expertise and technical skill development and projects throughout the world, we are able to select projects with an excellent risk return profile. On Slide 22, there are some key factors are helping us a sustainable growth. We now have a group that has a scale, a sizable and high-quality backdrop, sound financial discipline and risk management and a more efficient organization. Our backdrop fully covers our current business plan, allowing us to focus on the next door. We are continuing effort on one of our strategic priorities, which is derisking. We are revising our contract department to strengthen the monitoring process to ensure the timely identification of issues that could impede the progress of the words or imply additional cost. It will allow us to act frontly and execute claim early. As I said before, try and choose our capability and experience because we excel at delivering large projects, providing efficient solution to compress challenges. Thanks to this capability, we are proud to be unmatched and unique in this regard. As we navigate through the new paradigm of client relationship, our trajectory is clear. we are set to remain a global infrastructure leader unlocking opportunities in new markets and sector. We are making progress on the cost efficiency plan. At the exact midpoint of the current business plan we have already surpassed more than half of the schedule initiatives of the EUR 180 million in cost savings targeted by 2025, we have already identified initiatives for more than EUR 110 million. Our scale enables us to increase our profitability and cash flow generation. we are able to invest more in innovation and health and safety, and we can afford to be more selective in terms of clients and suppliers. Scale is allowing us to successfully invest in processes to optimize working capital. One of our levers for cash generation. We have implemented numerous initiatives to expedite compression of markets into cash. On Slide 23, we confirm our commitment to sustainability with the ambitious targets set up in our ESG plan until 2025. Innovation, clean technologies, health and safety, circular economy, digitalization, inclusivity, defined a necessary framework for pushing our ESG strategy and reaching the goals included in the plan. This plan is based on the same three main pillars that guided us successfully in the last years, green, safety and inclusion innovation. Let's start with Green. We want to further reduce our carbon intensity by 10% by 2025 to level registered in 2022. This is achievable, thanks to investment in clean technologies such as green TBMs, machines capable of reducing energy and water consumption and increasing safety. On health and safety, as already discussed, we are already the best-in-class compared to our main European peers. But we will not be satisfied until the injury ratio is equal to 0. We are convinced that we can further reduce the ratio by 6% by 2025, also thanks to our educational and training programs. On gender inclusion and diversity, we have set targets to increase the presence of women leading to the group. By 2025, we want 20% of managers to be female. On innovation, besides being a critical strategic element to ensure safety of workers is key to remain competitive on the market. We are committed to investing in clean tech projects for no less than EUR 430 million. The principle of sustainable development are fully integrated into the group, and we strongly believe they should be shared across the entire supply chain. For this reason, in July, we launched 15 environmental rules that will cover all our supplies and partners. We want to raise awareness and create a common vision on the issue. These dedications continues to receive recognition from the market. In the first half of 2024, we will confirm a sustainability leader by CDP's Climate Change 2023 program with an A- rating. It is higher compared to the regional European average and global construction sector. Moving to Slide 24. We are confirming our guidance for 2024. Order intake started well in 2024, thanks to an important contract in Saudi Arabia. To date, almost 2/3 of the new orders expected for the year have been received. As a reminder, for 2024, a book-to-bill ratio exceeding 1 is expected, along with revenues surpassing EUR 11 billion and EBITDA exceeding EUR 900 million. Our target for net cash position stands at more than EUR 400 million. We remain committed to our gross debt reduction target for EUR 200 million, EUR 250 million within 2025 and distributing a stable dividend to our shareholders for accumulated amount of EUR 160 million, EUR 170 million for 2023, 2025. Consistency is our must with the commitment taken with all the clients to deliver very large and strategic infrastructure and with the capability to generate cash year after year as we already demonstrated. Obviously, after the first half 2024. We are very optimistic on the full year results. I thank you for your attention. We are now ready for the Q&A session. So as not to slow things down, we encourage you to focus on the group strategy and other broad initiatives that underline its current and future financial performance. For any further questions you may have on figures or some other details found on the table some technical details mentioned during the presentation. The Investor Relations team will be available to answer them after the call. Thank you to all of you.

[Operator Instructions] The first question is from Emanuele Gallazzi of Equita.

I will start with two questions one on net working capital and the second one on profitability. Starting from the net working capital you posted sound bid at free cash flow level in the first one with, let me say, a still solid contribution from the net working capital. As you confirm the guidance on the net financial position, can you help us understand the evolution that you expect on the net working capital in the second half? And which are the main moving parts there? The second one is on the profitability. Given the -- even in this case, the solid margin expansion in the first half, can you give us some color on the performance of the Australian market and the U.S. market in terms of profitability in the first half. And let's say, on the U.S. market, do you still targeting to reach the breakeven at the EBITDA level by year-end?

Yes. Just to go back, I'll start with the second question about the profitability on the market. Of course, we are on our plan in going to breakeven online by -- in the coming future. The main negative contribution in the last years is due to some past projects, which have been generated EUR 350 million in losses over the last 5 years. To date, this has been all completed and the collection of the contract amendment is expected by 2026. So the turnaround plan is proceeding on track. For the Australian market. We are, of course, doing our best in putting together Class. We have integrated [ Klaff], Webuild, and we are now one of the very large player in Australia, and I think that the conversion of most of the contract type that was before a remeasurement and now is on incentivized cost plus or other forms as we were explaining of collaboration contracts, of course, have a significant impact also in marginal value. For the cash flow, Massimo...

Yes. Let me add on the marginality. You've got the Australia as a main contributor for the first half, but we expect it will remain for the second half, but we expect a better business mix in terms of margins in the second half, starting some very important projects in Middle East and continuing the profitable activity in Italy. Regarding the working capital, we still expect some improvement, some release of cash. We got what we expected and probably discussed in previous meetings and the conference call regarding the balance between new advanced payment and the restitution to give back of the advance payment that we got in '23 and '22. So we keep -- we expect to maintain this balance for the second half and to keep the same path in terms of CapEx. So some improvements will come from the receivable and payable management and working progress, the WIP that gave a very positive contribution in the first half. And this comes from the centralization that we mentioned many times with you and with the investors.

The next question is from Matteo Bonizzoni of Kepler.

My first question is a follow-up on these points, which you were making, Massimo on the cash flow cycle for the second half of the year. Because if you look at our guidance, your guidance, you're guiding generically more than EUR 500 million of net cash and you are more than EUR 1 billion better than that at the end of June. So we need a little bit to reconcile also even because you have just said in the call that in terms of delta between contract asset and the contract liabilities, you are not expecting a worsening in the second half which, by the way, by according to seasonality [indiscernible]. So I just wanted to reconcile your generic more than EUR 500 million guidance, with the point in which you are now, which is EUR 1.4 billion. Can you little elaborate on that point? The second question is on the gross debt. So I'm telling you something on which you are probably perfectly aware of in this very bright set of figure and positive outlook, the only, let's say, remark which we received from some time from investors, is the gross debt. So market is seeing that the gross cash is faring up. It's now much more than EUR 3 billion. You have a target to reduce gross debt of real plan by EUR 250 million, the market clearly would greatly appreciate, I think, also in terms of potential rating of the shares to see, let's say, gross debt trending gradually down towards EUR 2 billion. So the question is how much of this huge gross cash file, you are expecting to be able to use in order to gradually repay those debt. Clearly gross [indiscernible] ratio is very much in line with many other companies, [ 2.8% ]. You have said that rating agencies have improved the outlook. So not concerned about debt. But just to tell you in an absolute figure where we should expect some improvement also in this very billion set figure also on the gross debt. First question, which is just a follow-up, on CapEx. I think we don't see the cash statement in press release and also in the presentation, CapEx. So I would think that the gross assets were up EUR 300 million, sorry, from December to June, so in 6 months. So I infer that from that figure that your CapEx in [indiscernible] figure. So can you provide a figure? And also, I expect -- I would expect that closer for the full year CapEx. So your cash generation will be strong despite very high CapEx compared to history. Can you provide some updates on that?

Thank you, Matteo. Remind me the second question because I was focusing on the third one. The second was?

The second is clearly something which you are perfectly aware of question with list gross debt, no.

Got it, this is very important because we keep and we maintain the target to reduce the gross debt, something could happen in '24 and something more in '25. But more than that, because the total cost of interest charges coming from the gross debt is around EUR 90 million. The rest come from the -- use of the RCF line. We are working to optimize the this exercise, and we got some improvement in the first half, and we can get some other improvement in the second half. Then we -- as you probably remind in 2023, we had some nonrecurrent and nonmonetary items that we do not expect for the second half. So we expect to keep the line of the cost of debt under control and much better than 2023. We are still working, you didn't ask, but it's important to mention also on the tax line -- and we launched a program that will have some effect in 2024 and some other effect in 2025. We expect some material effect in terms of some EUR 10 million of savings. Then regarding the CapEx, we spent around EUR 360 million in the first half. We expect to spend around EUR 390 million, EUR 400 million in the second half. Of course, we started to buy CapEx already in 2023. So we -- we have been able to split the cash out in three different years '23, '24 and next the last '25. And then we have all the optimization in terms of refurbishment and so on. Regarding the what you call some elaboration, some bridge from the net financial position of the first half and the target that we keep. We know that the average consensus is already higher than our target. There are, of course, some the balance between a new advanced payment and the one that we have to employ for the production, but we expect to beat the target. We still don't know if in a so large way than the one that we got for the first half, 2024. I don't know if Pietro have has some other news, Pietro.

Nothing special, just the fact that, of course, the result in the first half 2024 are very significant. So I mean that even being very positive today, on achieving those results. I was anticipating a few days ago that we were very positive about not only the semester, but also the guidance of full year. We have always delivered and overdelivered and not overpromised on what we have done in the past. So I think that keeping our guidance is a value because this is a plan that we made carefully for the entire budget. I think that given some , let's say, very, very positive results in first half. It could also -- would also signify that we can be more positive on the guidance at the end of the year. But I would not change the guidance for that. Let's say, let's be out [indiscernible]. I think that this is the best thing we can do to be serious and to stick to our plan and to deliver.

Then regarding the claims, we do not have a new claim material increase. We have just the increase coming from the advance of production for some projects. Let me say that we are aim to achieve the consensus in the -- for the PSN and to beat it.

The next question is from Alessandro Tortora of Mediobanca.

The first one is related to the project under execution. Can you let's say, give us an idea if there are any major contracts this year where you are negotiating with the client change or some changes in the contract formula as basically you did last year? That's the first question. The second one is just a follow-up on your net cash level. Can you explain previously on the major driver behind this, let's say, higher level of cash. But what we'd like to understand is can you tell us basically the major reason behind this constant level of liquidity. If you -- is it a matter of the successful or timely claim management you are doing even better compared to the past. So just to understand the role played for instance, by the level of claims or the stock claims compared to the past in this, let's say, high level of liquidity. And the last question is on the level of cash is pretty high. Is that the possibility to see, for instance, an acceleration on the buyback side in terms of size and buyback program for you?

So let me start from the last question. it should be possible. To accelerate on the buyback, mainly due to the fact that we have a significantly -- we got a significant increase in the liquidity of the shares because we have free float that is around 45%. So the shares is more liquid and respecting all the rules, we can do something more, but just in a tactical way in order to help the market to maintain a high level of liquidity on the shares. Regarding the high level of cash -- most of that comes from the successful bidding and the commercial activity. So the liquidity that we got in '22 and '23, but we are still raising in '24 for the new contracts. And some cash come also from the renegotiation of some large projects made in 2023. Because it was a split in the coming years. So the total effect, it will be split and divided in different years. We are not renegotiating major contracts. We are in a very good relation with the main clients in particular in Italy, with [ RFI ] in order to maintain the milestone and to speed up all the projects where we are facing normal and usual difficulties.