ACS Group Net Profit reached € 201 million during 2020 first quarter

13.05.2020

COVID– 19 has particularly impacted Abertis and Clece
Industrial Services confirmed its strength and won € 120 million, 60% of the Group’s total Net Profit
Sales increased by 3.1%, up to € 9,553 million de euros, due to Turner’s good evolution in the North American construction market
Backlog stood at € 73,196 million, growing by 1.2% in the last twelve months, adjusted by currency effects
EBITDA decreased 8.3%, down to € 751 million, due to COVID- 19 impact on Abertis and Clece

1. COVID-19 Impact

Main impacts:

Abertis has been substantially affected by the lockdown and mobility restriction measures issued in most of the countries where it operates. Specifically, the average daily traffic has decreased since March around 80% weekly in Spain and France, significantly affecting its results. Therefore, its contribution to the Group's EBITDA has been reduced in € 50.5 million and its Net Profit in € 40.4 million during the first quarter. As these restrictions start to be lifted, a gradual recovery in traffic is expected.

Clece has halted or significantly reduced the cleaning and maintenance activities of those social infrastructures that have ceased their activity, such as schools or leisure centers, non-essential facilities and air transport. However, activity in hospitals and public facilities has been reinforced. Impact on EBITDA and on Net Profit has been € 12.4 million and € 10.3 million respectively.

The rest of the activities have had a minimal impact, and in Construction Turner's strong sales growth in the United States has offset the devaluation of the Australian dollar, affecting CIMIC (which sales consolidated 100% in ACS Group).

2. Consolidated Results

Attributable Net Profit accounted for € 201 million, showing 28.5% decrease compared to last year’s same period. Abertis’ lesser contribution, € 40.4 million less than last year, impact on Clece’s profit worth € 10.3 million, and differences in the valuation of financial instruments (€ 30 million), without cash effect, explain this evolution.

Not considering these impacts, Net Profit stood in the same levels as last year, assuring the strength and diversification of the Group’s businesses.

3. Industrial Services Strength

Industrial Services activity Net Profit in 2020 first quarter reached € 120 million, which represented 60% of ACS Group Net Profit during the period, confirming the strength of the industrial activity.

Turnover in Industrial Services in 2020 first quarter reached € 1,913 million, decreasing 5.5% as a consequence of the delay at the beginning of some projects and the devaluation of Latin American currencies. Adjusted by currency rate effects sales dropped by 1.6%.

Geographical distribution, the high percentage of recurring income from operations and maintenance, and current backlog volume granted ACS Group’s Industrial Services activity a good position to deal with the current situation and keep its defining operating profitability.

In 2020 first quarter EBITDA accounted for € 222 million, 5.8% less than in the same period 2019 (4.5% less, adjusted by currency rate effects) and in line with sales growth. Sales margins stood at 11.6%.

Industrial Services increased its Backlog up to € 9,652 million, with 72% rate of international contracts. Backlog decreased 1.8% due to exchange rate impact; Adjusted by this effect, Backlog grew by 6% in the last twelve months. Amongst the most important awards achieved during 2020 first quarter, it can be found:

Operation and maintenance system for electric buses at King Saud Bin Abdulaziz University in Riyahd (Saudi Arabia)
Installation of systems in the high performing educational center for second grade students in Tacna (Peru)
Contract with Telefónica for the installation of systems (central and southern zone) (Spain)
Work for the execution of installations in the new power plant in Barajas (Madrid, Spain)

4. Infrastructures’ internationalization

Infrastructures area has been affected by Abertis. Therefore infrastructure’s Net Profit decreased by 26%, down to € 97 million.

Construction area accounted for € 87 million Net Profit, in line with last term.

Concessions accounted for € 10.4 million after losing Abertis’ € 40 million contribution and Iridium’s € 7.9 million input.

4.1. Construction

Sales in Construction accounted for € 7,235 million, showing an increase of 5.8%, 6% when adjusted by exchange rate variation impact. This growth is supported by the strong 20% growth in Turner’s sales in the USA, while CIMIC sales were resented mainly due to its currency devaluation. Adjusted by currency effect, sales in CIMIC decreased only by 3%.

International sales amounted to € 6,941 million, which represented 96% of total turnover in this area, being North America and Australia the most important markets. Domestic sales represented 4.3% of total.

Construction EBITDA accounted for € 520 million, after growing 0.7%, with a sales margin of 7.2%

Construction Backlog by March 2020 increased up to € 60,834 million, 96% international. In the last twelve months Backlog grew 0.5% adjusted by exchange rate variations. Amongst the most important awards achieved during 2020 first quarter these are the most significant:

Construction of a New Bed Tower and Clinical Services Podium adjacent to the existing Wexner Medical Center Hospital. The work will also include the demolition of existing facilities and parking garages and include the construction of two new parking garages (Columbus, Ohio, United States)
Contracts to provide maintenance for UGL´s clients in the oil and gas sector in Western Australia and Victoria (Australia)
Design and construction of the project for a new section of the A15 motorway and additional lanes in sections of the A12 / A15 motorway in Arnhem (Netherlands)
Design and construction of 19.46 km of the S-61 highway between Prodborze and Sniadowo (Poland)
Contract for the rehabilitation and lane replacements of a portion Route 210 located in Los Angeles, California (United States)
Contract for the reconstruction of Taxiway Cat Love Field Airport located in Dallas, Texas (United States)
Several mining sector contracts with multiple clients in Western Australia and Queensland (Australia)
Improvement of two regional highways in Australia: South Gippsland Highway Upgrade between Koonwarra and Meeniyan in Victoria and Mackay Northern in Queensland (Australia)
Building of two residential towers, in Madrid (Spain)
Building of industrial plant and the administrative building of Imbisa (Madrid, Spain)
Project for the duplication of the roadway of the N-220 (Valencia, Spain)

4.2. Concessions

Abertis has been substantially affected by the lockdown and mobility restrictive measures issued in most of the countries where it operates. Specifically, the average daily traffic that Abertis manages in Spain and France has significantly decreased since mid-March, around 80% weekly. Its revenues decreased 15% during this last term and EBITDA was down 17%; therefore, its contribution to ACS Net Profit during this first quarter dropped to € 2.5 million from € 40.4 million.

On its side, Iridium accounted for € 7.9 million Net Profit as a consequence of the sale of different concessional assets.

5. Services Social Commitment

Sales in Service to Citizens area (CLECE) reached € 393 million, growing by 1.0%.

The impact of the pandemic on Services area has been significant since the state of alert was declared in Spain, its main market, in mid-March. On the one hand, certain cleaning and disinfection activities have been reinforced in hospitals, health centers or police facilities and other departments. On the other hand, services have been halted in educational centers, industrial facilities and other social infrastructures, as well as airport activity services.

Services EBITDA accounted for € 10.3 million, decreasing by 54.8%, as a consequence of the substantial increase in costs derived from action plans related to coronavirus.

Likewise, Clece has put part of its workforce at the service of the society developing cleaning activities selflessly and assuming the totality of the costs derived from it.

Backlog reached € 2,710 million, equivalent to 21 months of activity.

Amongst the most important awards achieved during 2020 first quarter these are the most significant:

Renewal of cleaning contract in health centers and the corporate center of Institu Català de la Salut.
Cleaning service in two hospitals in Granada (Spain)
Cleaning service in facilities of the Ministry of Defense (Spain)
Cleaning service for hospitals in the Community of Madrid (Spain)

6. ACS Group Diversification

ACS Group sales in 2020 first quarter accounted for € 9,553 million, representing an increase of 3.1% due to the good performance in the North American market, which offset the decrease of the Australian market derived from the currency devaluation.

Sales in North America accounted for 51% of total, Europe 18%, Australia 16%, Asia 5%, South America 8% and Africa de remaining 2%. Sales in Spain accounted for 13% of total.

By countries, United States, Australia, Spain, Canada, and Germany contributed with 80% of total sales.

Backlog in March 2020 stood at € 73,196 million, decreasing by 2.9% due to the Australian dollar devaluation and the Latin American currencies. Adjusted by currency rate effect Backlog grew by 1.2% in the last twelve months.

7. Operational Results

Total EBITDA reached € 751 million, decreasing by 8.3%. The lesser contribution coming from Abertis, which profit is consolidated in ACS Group’s EBITDA and the impact on Clece are the reasons for this drop. Not considering Abertis, EBITDA from rest of activities was only down 2.7%.

For the same reason, EBIT decreased by 12.0% and stood at € 491 million. Likewise, not considering Abertis, EBIT for the rest of activities decreased by 3.2%.

8. Financial Situation

At 2020 first-quarter-end ACS Group reported a net debt balance of € 2,374 million, equivalent to 0.8x annualised EBITDA, after handling payments derived from CIMIC exit from the Middle East market, worth € 800 million.

In addition to that, during 2020 first quarter the Group invested more than € 250 million in energy projects and concessional assets, as well as € 103 million to increase its stake in CIMIC. The Group has also devoted € 206 million to ACS shares buyback program.

Equally, on March 31st 2020, the Group had a cash balance of € 9,054 million that added to € 3,329 million available on credit lines reached a cash position of more than € 12,000 million. Furthermore, the Group cashed financial assets worth more than € 1,500 million.

9. Investments

ACS Group total net investments during 2020 first quarter reached € 343 million as follows:

Net operational investments amounted to € 155 million and mainly corresponded to the acquisition of machinery and equipment for the Group’s different projects, mainly for mining activities, civil work and industrial facilities.
Financial and projects investments accounted for over € 365 million, amongst them:

- € 227 million in HOCHTIEF, including the increase in CIMIC’s stake worth € 103 million;
- Investment in energy projects on Industrial Services side, worth € 121 million;

Divestments stood at € 178 million, and mainly corresponded to Iridium’s sale of different highways.