Ferrovial SE (FER) Q2 2021 Earnings Report, Transcript and Summary

Good afternoon, everybody, and welcome to Ferrovial's Conference Call to discuss the Financial Results for the First Half of 2021. Just as a reminder, both the results report and the presentation are available to you on our website. As in previous results, and although some restrictions to mobility have been lifted during the first half of 2021, we would like to highlight the financial information included in our report has been impacted by the COVID-19 outbreak, mainly since the second half of March 2020. Given the uncertainty regarding the speed and the extent of resumption in activity, it is not possible to predict how the health crisis will affect Ferrovial's group information and performance for 2021. Ferrovial will continue to closely monitor trading conditions and further evidence of wider economic impacts. I am joined here today by Ernesto López Mozo, our CFO; and the CFOs of our business units. If you have any questions, you may ask them through the forum included in the webcast. During the Q&A session at the end of this call, we'll be reading out your questions and who they are from. With this, I will hand over to Mr. López Mozo. Ernesto, the floor is yours. Ernesto López Mozo: Thank you, Begoña, and welcome everybody to the first results conference call. While starting with the highlights, I would like to start with the Texas managed lanes where we have seen in June, traffic already above June 2019 for the NTE, up 6.4%. And NTE 35W was up 19.4%. LBJ is still short of those pre-pandemic levels in terms of traffic 13.6%. And we have to remind you that the numbers here you'll see May was impacted by weather conditions, but the traffic performances is strong. But more important, there is a strong revenue per transaction growth in all the managed lanes and we are seeing this growth in the revenues from the higher toll rates and a better mix in terms of a higher proportion of heavy vehicles. Also, we got €14 million in dividends from NTE and LBJ. In the 407. We have seen a lot of restrictions really with the stay at home orders until June the 2nd. But traffic has really been improving since they're reopening. And in the last seven days, the rolling performance was 32% drop [indiscernible] 2019. This is July 20th numbers. We are now in July in the step three of the face reopening and we'll see more on that in the presentation. In the I-77. We also saw a strong recovery in the second quarter and the traffic is already at pre COVID-19 level say we take February 2020 as per COVID. So by union we were achieving these numbers. I would like to say that is not only traffic, but I will express the revenue performance that reflects the possibility of change in tariffs and really taking benefit of a strong economic recovery or even inflation tailwind in our assets. If we move into airports the main highlights, while Heathrow published yesterday also, some days before either updated the investor report with an estimated traffic for the year of '21 and a half billion passengers as the base case of course it provided a range of the scenarios where a stress case reached 13 million passengers. On light of these, let's say volatility of expectations, Heathrow has launched a preemptive waiver of the group interest coverage ratio covenant for 2021 at the Heathrow finance level that the holding above Heathrow. In eight years our refinancing was completed, we call it amend and extend and then the maturity is now June 2024. In contracting we've seen a strong performance. Construction reached 2.4% EBIT margin. This excluding the impact of divestments and I would like to underscore the strong performance of Budimex. Also the sale of non-core assets in construction is finished or on track and will say very positive cash flow impact around €350 million in the first half. So that the main one was the divestment of the real estate business in Poland. Also [indiscernible] in Spain and we have other transactions that have been closed in July or expecting closure in the coming days or weeks. I mean, one of them is Nalanda that closed in July. And we also have figures and the recycle aggregates [indiscernible] SEC, but that is pending final authorizations the same as figure. So, all this should happen, let's say in the third quarter. In terms of services, we have solid operating performance across the board and also strong cash flow generation. There was an agreement reached for the sale of the environmental services in Spain and Portugal for an enterprise value of €1,133,000. We just announced that before market opening today. So this is part of the business in the Spain. More on that later on the presentation. So after all these first half, we have a strong financial situation with a net cash position, next infrastructure of €1.8 to €159 million €1,859,000 and a total liquidity ex-infrastructure of 6.5 billion. So we move into the operations and the starting with the toll roads. We see that there was a very strong growth [indiscernible] last year. As I mentioned in the opening, I mean the restrictions have been lifted in the U.S. and also toll rates in the managed lanes, they have been raised and also held by a higher proportion of heavy vehicles. The U.S. has a strong presence in these numbers, I mean 77% of toll road revenues and 92% of the EBITDA. We have assets under development that will come into - let's say operation in the coming months or years. I would like to highlight the NTE 35W segments 3C. I mean, you will see in a minute the performance of the - of these road dealer segments A and B that go for a stretch of around 10 miles. This project will add 6.7 miles is a 66% addition of a concession that ends in 2021. We are aiming to open at the end of 2023 with a pending investment of €23 million. I mean you'll see the importance of this asset given that the catchment area is very similar to the one of the previous two segments. So these projects should add a lot of value. Also very important one is I-66 studies longer says 35 kilometers, 50 year concession that construction is expected to finish at the end of 2022 70% complete. And this project that is a big one is the one that is driving most of the cash outflow in investment. This year in particular, in the first half €150 million were invested in this project, we still have a little bit more than 450 pending. And then we show others that are advancing well. Some of them are quite near completion. You can see all the data there. And Ruta del Cacao in Colombia traffic risk, the other three are availabilities, right. So we can move to discuss more of the manage list in next slide. Here we see the traffic performance that I was mentioned in the opening, of course, you have a big trough in February with the winter storm and also you had heavy rains in May, I think that it was something like 60% higher, let's say rainfall that in the previous year. And that affected traffic, but if we look into the end of the period, I mean in June, as I mentioned in the opening you can see traffic above the 2019 levels pre-pandemic. Not yet in the LBJ, but also the LBJ is kind of slowly catching up. Okay, so we move to the next one. Here we can see a very important message and as I mentioned traffic is recovering these three pandemic almost or pandemic levels, but look at the revenue performance. I mean, this shows that there's - this capacity to change tariffs that adapt to the demand optimize the revenue flow and the value of the assets right. So if we move on to the next slide, we can see also very interesting patterns emerging. And here we compare in gray is the first quarter of 2021. In yellow we see June 2021. And we from in a kind of blue, between blue and gray. And we have the pre-COVID graph, that refers to June 2021. So we can see some emerging patterns that are quite interesting. We look into NTE 35W and NTE, of course, the afternoon traffic is clearly the peak is the higher, but we see that I mean, there's quite a spread in terms of traffic distribution. We see that the midday is clearly above pre-pandemic levels. And I will say that is quite flat along the day in both in both assets. And as the economy grows, we could probably see more of these. So peaks are spreading. And traffic is clearly on an excellent performance. On top of that we add the ability to change prices and inflation as a tailwind, you can see the I mean, the prospects of this asset is excellent. Also, we have the I-77. But we can see that that kind of pattern very similar. So middays is really performing well. And LBJ has some catch up to do yet, but it's still we can see some similar patterns emerging. So peaks are spreading, overall level of traffic is going to be quite interesting along the day. And this is a reflection of the more logistics and commercial travel. And also people taking use of flexibility, maybe a work from home or other sort of changing patterns, but that they are moving. I mean, they're just choosing to do that in a more varied way. Okay, so if we move into the next slide. We can see the more specific data where we see the growth in transactions in NTE LBJ and 35 was the growth in revenues ahead of that and of EBITDA even higher. So you see the kind of margins that this is achieving. The traffic performance, really strong activity since the reopening in March 10 with heavy vehicles showing more procedures. And a good example of the kind of traffic levels we have is that we are achieving or I mean running into mandatory mode events at even higher frequency that in February 2020, pre-COVID. In the NTE 35W, we see the peaks that are above as we saw, as we showed in the slides prior to this. Okay, so strong with use a tool, this is the reflections of what I commented before. Okay, we see the average revenue per transaction on the right hand top side of the slide, we can see the level of it increase that you can achieve. Okay, so this flexibility in tariffs is great in an area that is growing economically. So the region update is there at the right bottom corner of this slide. And you can see that schools are not 100% in percentage. I mean, there's really no restrictions in terms of opening of businesses and facilities. But it's still you see that vaccination that advanced a lot and is probably high compared to other regions. I mean, this is not as high as other countries as we see in a minute right. So Canada that was lagging behind has overtaken these levels. And also is very important that Texas is leading the back to work polls in the U.S. according to Castle Systems. If we move on to the next slide, we see the I-77 that clearly has done a very important catch up since reopening of the region. And you can see that traffic is now at the February 20 levels. And also, we have seen quite an increase in revenue per transaction. Okay, so in May 14th is when we start really North Carolina lifting restrictions so it's clearly a little bit behind Texas but it's there. And we can see that now. Close to 60% of the population, and this is the first dose in vaccination. So moving on to the 407, we see the comparison to 2019 levels. And we've seen that it has been, let's say subdued because there has been a lot of restrictions. And that's what we reflect on the inside of the slide with all the different dates and restrictions. You see that throughout the first half, there's been a lot of restrictions. Now in July, we see reopening, and we'll see more of the traffic performance when schools go back to in class education in September. The main message here is that Canada is really overtaking other countries and leading probably among the leaders in the world in terms of vaccination now with 70% to 80%, with the first dose and 25%, fully by July 16. And this keeps going. So probably this will leave a better situation of immunity that could enhance mobility going forward. If we move on, we can see the traffic comparison how, as I was mentioning the reopening the last seven days up to July the 20th sorry, and you have 32% drop [indiscernible] 2019. But as I said, this is slowly catching up, vaccination is clearly the main driver of immunity, and that could help mobility going forward. If we move on please, we can see the financial data on the 407. The 407 published some days ago, here we can see how traffic has been affected by all these restrictions that we've seen in the case and increasing the, let's say, revenue per trip. And the tariffs has not been chases February 2020. One of the messages that no dividend was paid in the first half of 2021. The performance for the second part of the year should keep improving. And we see that the asset has a lot of liquidity, right. We see that it has close to CAD700 million so far cash and equivalents and it has 800 million in undrawn credit facility. So there's plenty of liquidity, there's been a few maturities coming up, you have €10 million in 2021. In 2022, it's close to CAD300 million. In 2023 CAD20 million. So it's a very benign maturity profile on an asset that has a lot of liquidity and is recovering traffic. Okay, we also include here the Schedule 22 information that they follow. Seven has provided most of you will love this information, but it's good to keep it there for you to check if you need to check in. So we move on to the next slide. We can see Heathrow's performance. Clearly, I mean, we probably stated yesterday, you can see that the restrictions to air travel have been really impactful and we can see that Heathrow has been doing a great job in containing costs, optimizing revenue and optimizing CapEx of course always with the safety priorities of capital has been constrained and focused on safety and resilience. And it has been preparing the airport for reopening amid the pent up demand is there in the July when the government lifted restrictions to travel to a number of countries without the need of a quarantine it would you were vaccinated had a great uptick in traffic. I mean we'll have to keep an eye on that, but clearly, he's so prepared for that search and on traffic reopening terminal three and also opening team for us released arrivals facility for people from their - from around these countries. Okay, so I mean clearly affected. Heathrow great job in terms of cost controls. The outlook is probably the most important thing to mention now given that Heathrow has done its homework in terms of liquidity and cost containment right. So, regarding the outlook, I would just like to remind you of the latest symbol report that points to 21.5 million passengers. But there could be a case scenarios where you could go to the lower part of the range that is 13 million passengers. And just in case that that happens is not the base case. As I said, it's not Heathrow expectation. But if that happened, just preventing that waiver for the ICR Group covenant that Heathrow Finance was launched. And expansion, we still think it should happen. And clearly the NPA, NPS is lawful. And Heathrow will reopen the interim property and [indiscernible] and is consulting with government, customers and regulators on the next steps because eventually these should get done. Regarding regulation, there's not much to talk, but a lot is coming. Okay, so Heathrow asked for Rob restatement, it got a minor interim adjustment of £300 million. But I mean, the understanding is that much more should be done, we'll have to wait to see how the CIA addresses H7, with all the different considerations of Rob and allowed return for the asset. As I said, no point in discussing our feedback will come in the fall. We'll update investors as things develop. Okay, so just remind you that the next regulatory period is starting in January 2022, maybe there could be a potential gap, but it should start there. Okay, so moving into yes, the performance again has been affected by restrictions. The main news is that the refinancing was successful and amend understand of the debt facility going into June 2024. And here there was additional commitment of funds in this refinancing £20 million that is 100% of shareholders say and get to £20 million and there is another additional 30 covenant right and the next external debt is left at £780 million. Okay, so our successful extension of refinancing and really waiting for the reopening in terms of traffic, probably worth mentioning that Aberdeen is performing better and also Aberdeen, that is related not only to oil and gas, but prior to offshore wind has this sort of better relative performance. Again, that is pent-up demand waiting to travel right now everything is affected by these restrictions and also, we put in the slide some of the initiatives that the management has been doing to contain costs and CapEx. So we move on to construction that as we mentioned in the beginning, had a strong showing and we compare quite well to last year. Remember that last year, the first quarter was affected by COVID. We said probably and EBIT impact of €44 million, this year has been better of course, leaning on Budimex's strength with EBIT margin of 8.3%. Here there was an extraordinary component because when the real estate division was sold, there was a release of the results of the Civil Works Department with a real estate division that was reflected in this quarter. In terms, we take this into account, the ordinary EBIT margin is 6.2%, that is quite remarkable in the construction sector, we have excluded in these numbers that contribution from the real estate business. In terms of asset sales, as I mentioned different prices have been going on, the main one being the real estate has been discussed already €330 million per transaction cost in euros. Also it was completed, this is €17 million and we have Nalanda this another €17 million, this is a sale of a digital platform for documentation management for suppliers. This was closed in July and we have just pending some final approvals also on the availability concession in the figures that was agreed for €41 million and is just about to be approved, that should be the case. We also have the competition authorization, the Hart-Scott-Rodino for the SEC business that is agreed for $140 million. In terms of operating cash flow, clearly as we mentioned in other conference calls the production advance in the U.S. and other countries means there's that kind of strain. from an operational point of view, the new businesses that have been closed if they do can come with, you can get some let's say down payments or let's say advanced payments could help in operating cash flow at year-end otherwise, we should be consuming cash in particular in the U.S., productivity cash flow is positive on the back of all these divestments, I was mentioned before the possibility of some advance payments, clearly awards have been higher than other years in these late months. And you can see that not in the backlog, we have some big projects like this I35 in San Antonio, €1.3 billion or Sydney Metro that is €620 million or Budimex contract for €630 million. So usually that's quite higher than the normal pending signing for the backlog. Okay, so if we move into services, you can see that the comparison 2020 is quite outstanding. There's a very good recovery in terms of revenues and EBITDA margins, higher activities really across the board in the U.K. and Spain. In Spain, both activities are growing, revenues and EBITDA, environmental and infra, environmental is the one that was just agreed to sell and infra is related to infrastructure maintenance, be it in civil works or hospitals and it also has some additional businesses related to energy maintenance, lighting and so on. In terms of international, so we saw improvement in Chile and North America and North America in particular road maintenance is really performing well and in Chile, remember that it's related to services to mining companies. In terms of cash flow generation, also very strong €184 million with very good collection, terms and activity. Cash flow that is €149 million does not include any impact from asset divestments again. Also I'd like to mention waste treatment in the U.K. as we said we're keeping that for let's say some reshaping of the business. And in particular, we're looking at the potential to improve waste recovery plant, we're trying to convince client and other potential clients of really treating more tons and so trying to buy capacity here because in the U.K. as in our places, there's waste going to landfills and from an environmental point of view, we think we have a good proposition right. So, this is the kind of proposition that is being done to turn around some of these contracts. Okay. So, we move on to the next slide. We have more information on these numbers regarding the disposal of the environmental services in Spain and Portugal, environmental services is mainly waste treatment and collection also recycling of plastics and this has been agreed to be sold to [indiscernible] that is accomplished from the source group, the enterprise value is 1.133 billion with an equity value taking into account the balance sheet at the end of 2020 and equity value of €950 million, here we have some numbers for you to assess the transaction EBITDA for 2020 was €130 million. This includes some EBITDA from projects around €29 million of EBITDA that usually gets dividends. And this is the way we portray them in our results. And you can see that on a recurring basis, this €29 million EBITDA produces something like €10 million of dividends. Okay, so we expect closing of this to happen, this year and we can move on to the next slide please. And here we have a rundown of the main items of the P&L account. While the higher revenues are really held by in both the divisions, construction and toll roads, remember that we don't consolidate their business that is the one most affected by restrictions, EBITDA it's also quite higher than last year, close to 89% and this is also helped because last year, we took our provision for the restructuring of the support functions. In terms of financial expenses, it's very similar to the first quarter when I mentioned that in the infrastructure projects, we have the effect of the mark-to-market change on the inflation sort of Autema remember that Autemahas pretty much negligible value for us and it has a book value of negative 135. So, for it to be sold for let's say €1 without that sort of positive P&L impact and the next infra project will have some additional costs is the impact of lower cash remuneration and higher average gross debt to higher average gross debt should be sorted out with the repayment of €500 million of bond in mid-year. So, we should have more comparable gross debt in the remainder of the year to last year than this first half. Okay, so gross debt has been is going to be reduced slowly along the year, then we have the equity account results, here we have lower results in the 407 ETR that we already mentioned. And then you have Heathrow with all the limitations in traffic affecting and in AGS, we also have an impact and is basically for the equity that has been injected in the company that has to be provided right. So, we have for now is zero book value for Heathrow and ABS and that should kind of freeze the impact of results until we recover a above that nil value. In terms of net profits from discontinued operations, we have €208 million and this is almost evenly split between the impact of the real estate business divestment and the positive impact of Ferrovial services in the Spain, remember that as long as you have offers as is the case with environments that are above the fair value that you have in your books, you can keep recording these profits, that's the reason why we're recording them now. And then we have some minor adjustments in international services as some of them are related to the waste treatment that we discussed in Europe that we're trying to turn around but we took the view of taking a provision and see we can get the turnaround as I was mentioning of creating more towns that would be good for the environment. Okay, so we move on to the next slide, we see the cash flow evolution. So, I will comment on some of this breakdown, while the dividends from projects we already mentioned mainly coming from LBJ and NTE, then you have the working capital revolution that reducing the first part of the year happens is affected by construction, kind of unwinding some of the advanced payments at the end of last year. And then we have investments that are higher this year than the past in particular with the I-66 being invested, deployed then you have divestments and shareholder remuneration when most of these share buybacks. In other financing cash flows, the main impact is the deconsolidation of the cash from the real estate division Budimex, so it has to be seen in conjunction with a number of divestments, right? Okay, so we end the semester with the first half of the year with a very strong position of around €1.86 billion. Okay, so we move on to the sustainability part. Here we'll have a more detailed rundown of KPIs at year-end. But I think it's worth mentioning some of the different milestones achieves or awards, I already mentioned that we have two new independent board members, a female that I commented in the first quarter results, we also had at our AGM, our climate the strategy presented to shareholders that had an 86% votes in favor. We also published in our website, these supplier code of ethics. And our different businesses are also launching their sustainability strategies and ages in particular, there's a lot going on around Heathrow, I encourage you to visit that website where they have a lot of info on that. And then of course, there's some awards for your perusal, we can move on to the concluding remarks and here, very important messages that I mentioned in the past that the economic recovery and vaccination are very important to recover mobility. And also, it's the flexibility in tariffs is proven very beneficial, and with some sort of inflationary pressure more so, in airports restrictions are still there. But we see some light of some reopening, pent-up demand is there, we really need to get more vaccination as passports working for more traffic to recover. Contracting is performing well, we cannot say it's affected by COVID now, it's performing well with good margins and excellent contribution from Budimex. In services disposal we had major step with the waste business in the Iberian Peninsula being the divested and the rest of the processes are ongoing. As I mentioned in the other conference calls, we want to have the most of them signed this year even though closing the facility into next year, but we'll try to accelerate the market is there, after let's say the kind of COVID stoppage last year. And then we close with a very strong financial situation now have dividends from the Managed lanes and the asset divestments, I already mentioned some of the ones that will be coming in the second part of the year. Okay, so thanks for bearing with us. And let's open the Q&A session. A - Begoña Morenes: Thank you, Ernesto. Could everybody, please hold. The Q&A session will begin shortly. Thank you for holding, the first set of questions come from Alejandro Vigil from Bestinver. Please could you update us on the strategy to sell the remaining assets in services after the Spanish media's comment about a potential combination with other companies in Spain? Ernesto López Mozo: Well, thanks, Alejandro for the question. I'll take this one, this is Ernesto. Well, the remaining services in Spain are related to infrastructure maintenance coming from hospitals to roads, bridges, tunnels, it also has other things like some energy efficiency bars from lighting, because a variety of services and capabilities that are differential. So, we are open to different alternatives, we think that it could make sense given that the market is with quite a number of players. So, market shares even though we are one of the leading companies, we are short of 7%. So, adding differential capability from a technical point of view and scale could make sense. So, we are open to that, and the assets should grow. We should reduce our exposure, but should grow. With the help of as I said, these differential capabilities, and also the possibility of platforms, why not? It could make sense, that's the only thing I can comment. Begoña Morenes: Thank you. Next also from Alejandro. Could you comment on the use of proceeds from the sale and priorities in terms of reinvestment versus dividends? Ernesto López Mozo: Okay, if you're, we remains in the preference for management is to create value within the sale investment. We know that we are kind of advancing with sales and generating cash and maybe not investing that much, but the whole company is working on different strategic initiatives from the Horizon 24 Plan, and we expect to deliver. So if there's a preference, there's a preference for that. But of course, always keeping an eye on balancing with remuneration to shareholders. Begoña Morenes: Determine. And last question from Alejandro. When do you expect for real dividends to its shareholders to return to pre COVID-19 levels? Ernesto López Mozo: Well, we'll have to see the board is looking at that. No decision did I mean that will come probably more updating the next quarter or a year-end results, but is looking at the pipeline the different opportunities, and also the results of no decision yet, but we are on the path to that. Begoña Morenes: Thank you, Ernesto. The next set of questions come from Charles Maynadier from Kempen. How much roughly does Portugal represent from the €130 million EBITDA of the environmental services, which has been sold? Is this part included in the international segment that you report? Ernesto López Mozo: Okay, thanks. So it's a quite small. I mean, it's, I would say slightly below €6 million with EBITDA like €5.6 million or something like that, if I recall, correctly. And just previously, it was reported in the international - support in the international part of the business. Begoña Morenes: Thank you, Ernesto. Also from Charles, what is the book value of the business that remains after the transaction? Ernesto López Mozo: Well, the book value for the total services was just north of €1 billion by €1,030,000. The one that has been agreed environmental services in Spain and Portugal has a book value, had a book value at the end of 2020 of €600 million, right. So just doing the simple math, the remaining is €430 million. Begoña Morenes: Thank you, Ernesto. Also from Charles post this divestment, what type of activities do you have left in Spanish services? Ernesto López Mozo: Okay, well, as I said in a prior question, the main ones are infrastructure maintenance, that means an integral approach to buildings, hospitals, industrial maintenance, also infrastructure maintenance like roads, bridges, tunnels. And you also have other additional services that are related to optimization from an energy point of view lighting, that sort of thing, right. So the main ones are the ones that I mentioned even though there's some other minor activities. Begoña Morenes: Thank you, Ernesto. And finally from Charles, what is the status on the rest of the sale for services? Can we expect any news flow soon? Ernesto López Mozo: Okay, so we have a variety of processes here. And well there also some activities for instance, in the services portfolio, there was a concession that is a shadow tool that is called the A to Arabia. As I said, it comes with a maintenance contract but the main value driver is this shallow toll concession. This is our toll concession has done LBJ for around €30 million gave for decades - more or less €30 million right. I mean in 2019 unknown COVID but it was quite resilient facilities at shadow toll. Given that is a shadow toll concession we think it fits more with Cintra rather than being sold. So that part is carved out for Cintra, we will see with Cintra going forward. As I said, these are shadow tool. Then the infrastructure services for maintenance, maintenance of infrastructure in Spain, is another process. Then we have one in Chile. And then the other one is say maintenance in the U.S. And of course we have aiming that has main aiming the core, and also has a separate process as is for let's say utilities and maintenance. Okay, so we have a variety of them. As I mentioned also the waste stream in the U.K. that has been, let's say overhaul, and we'll come to the market later on. The others that I mentioned are all scheduled to be kind of signed in 2021. Begoña Morenes: Thank you, Ernesto. The next set of questions come from Luis Prieto from Kepler Cheuvreux. Can you give us any update on the high complexity concession pipeline in North America? Are you detecting increased competition in those projects in which you would be interested?

Thanks Begoña. And thank you Luis for your question. This is from Pedro Losada from Cintra. We are keeping on following the market with the feeling positive to see new opportunities coming to the market with respect to high complexity is a little bit soon, but we know that some of the deal these are the one that has been announced from Georgia are planning to bring new high complexity projects to the markets and we know that in the short and medium-term some of the duties are going to bring back also some of these projects. With respect to competition. It depends on the type of the projects, if we are talking about these high complexity, Greenfield project, manage lanes, dynamic tolling, there's not too many out there the usual suspects and we don't see too much competition. As you know, we feel that we have still highly competitive advantages to understand much better this type of projects. So but we don't see too many players coming soon to these complex projects. Now there are some other type of projects as the ones that we have been prequalified already in in Miami or I-10 cash use in Louisiana, and working on the pre-qualification of the Pennsylvania bridges where there are different risk profile, and potentially we can see other type of competitors or more competition coming from both in performance and developers as well as construction companies. Thank you. Begoña Morenes: Thank you, Pedro. The next question also from Luis was, is your view on the current iteration of Biden's infrastructure plan proposal. Now that it seems that three Ps or the PPP approach could be explored in order to finance some of the projects?

Thank you, Luis again. We see the Biden's infrastructure plan quite optimistic and very good news for our company. As we have said many times, at the end of the day, the final decision used to come from the federal government are the ones that needs to political greenlight to go on with the project. But from the central government, they could provide some critical help from the development of many projects with the program and other flexible financing and that kind of stuff that definitely could boost the final stage of the project to make them available and to make them profitable for the developers and at the end of the day to make them possible. So that's the main idea from us behind the central government support. Perhaps it's too premature, because we don't have the exact details of that plan. Begoña Morenes: Thank you, Pedro. The next set of questions come from Elodie Rall from JPMorgan. How do you explain the traffic on LBJ is still lagging compared to 2019 levels, despite Texas reopening? Do you see risks on the structural impact of this toll road specifically?

Thank you Begoña. Hi Elodie, this is Pedro Losada again. Thanks for your question. Let me start with the second one. We definitely don't see any structural problem in this road. As we have said and we are keeping on improving in things like vaccination, economic recovery from GDP perspective in the area unemployment rates. But it's true that there's some differences between the LPJ and the NTE 35W. Some of them are the ones that is impacting more in the performance and the speed of that performance with respect to the other ones. Things like the proportion of white collar workers with the ability to work from home higher among the LBJ users done in the NTE areas. More demand lag due to less density, vehicles per mile recovery on LBJ general purpose lanes compared to NTE and NTE 3 and perhaps also lower proportion of trucks in the India which I remember that also has been impacted by construction works on the 635 East that is going to have some negative impact probably in the coming years during the construction and positive one in the long run. As soon as we recover traffic particularly on the peak hours. The revenue per transaction will increase. And we will see probably some acceleration on the LBJ recovery that that recovery estate will be driven by return to office in that particular area and in Dallas particularly, most offices are planning to fall or hybrid open in fall 2021. And also main school districts have announced that this next fiscal year starting at the end of focus will be 100% in-person. So again, coming back to the argument of the increase in revenue transaction and the increase in in traffic in peak hours help us to understand that we need to feel a little bit more positive on LBJ. Begoña Morenes: Thank you, Pedro. And the last question from Elodie. Given your comments on likely recovery in the second half the 407 ETR and the strong liquidity position at the asset. Can we expect the 407 to pay a - third quarter? Or do you think the fourth quarter is more realistic?

Thank you, Elodie. Thanks for the question. I think that what we have shown in this presentation is as soon as restrictions are lifted, we are showing a quite accelerative recovery from the 407 with respect to 2019. We are still under stage three, that will end probably by mid-August. So after all the restrictions are lifted is probably the right time to evaluate when the company is ready to distribute dividends. Good news is that an acceleration of the - on the recovery and the better performance in the first quarter of the year, and also up with a good unhealthy liquidity position or give us the opportunity to do so by the end of the year. I don't know if it's going to be in the Q3 or Q4. But now that we feel optimistic also with that we're in compliance with the debt service coverage ratio on the rest of the covenants that we need to comply to distribute dividends and having the casino accounts we believe that we are going to be able to distribute dividends but not sure yet is going to be Q3 or Q4. Thank you. Begoña Morenes: Thank you, Pedro. The next set of questions come from Jose Manuel Arroyas from Banco Santander. First question Dallas is showing that traffic patterns are changing with morning peak hours a flattening, but afternoon peak hours becoming more meaningful than pre-COVID. Is it reasonable to assume that a similar traffic pattern could materialize in Ontario 407 ETR post restrictions? And if so, how would this impact the 407 ETR in terms of meeting Schedule 22 traffic thresholds?

Thank you, Begoña. Hi, Jose Manuel this is Pedro. Issue that we see some changes in traffic patterns with respect to peak hours on AM/PM traffic is true also that we are seeing these traffic patterns with some of the restrictions still there for example, with respect to schools and offices with, when it comes to your question on whether it could materialize in Ontario and whether they can this could have an impact on Schedule 22. I would like to remember the ways method the skill 22 is based on the highest to two peak hours of every segment independently they call in the AM or PM peak. If the PM peak are now higher than the AM, there will be the ones used for this qualitative two calculations, then having a neutral impact. Actually I remembered properly, most of the average segments flow rate were calculated with the PM peak hours as the highest values. Thank you. Begoña Morenes: Thank you, Pedro. The last question from Jose Manuel. Raw material prices inflation, how concerned are you about rising raw material costs hurting construction margins in the foreseeable future? And what can be done to offset this inflation?

Yes, actually we are having increases in prices in raw materials like bitumen, cement or steel. And we're constantly monitoring these in our main markets now, U.S., Poland and Spain. But as you know, these impacts are very regional. I mean, I'm very specific in each one of the areas. So, whatever you see, I mean cannot be extrapolated from one area to another. But the way we monitor this is in two ways. I mean, first thing in our backlog. And of course, as you know in Spain and Poland our indexation formulas with public administrations will limit the impact of this inflation, but also, I mean in the early stages of every period, we try to close loans and contract with our suppliers. So somehow the prices are fixed in most of our backlog, and we don't expect a huge impact in our backlog and regarding new contracts, we're usingquite advanced tools, to better estimate this inflation, we're using data analytics and also artificial intelligence in every new bid, I mean, that we're bidding. So well all these new contracts are factoring these increases in prices. So we believe that that all the new contracts and those that you have seen that are not now included in the backlog have considered these from the even from the early stages of the design. Thank you. Begoña Morenes: Thank you. The next question comes from Filipe Leite from CaixaBank. As EBITDA the line others reported minus €30 million in the first half of 2021 versus plus €15 million euros in the first quarter of 2021. What is the reason for such a difference in the second quarter?

Thanks Begoña and Filipe, well, here there's two main items that change from plus 15 to minus 13 and one of them I already mentioned is the provision for the waste treatment plant, that is like €12 million. And then there's another provision of €15 million because there has been an agreement regarding the SH130 litigation and we've taken that in others ahead of the signing. Begoña Morenes: Thank you. So the next set of questions come from Nabil Ahmed from Barclays. First question on the managed lanes, since traffic is broadly back to pre-pandemic levels, could you please maybe elaborate on the mix, are heavy vehicles much higher and cars may be still well below pre-pandemic levels and therefore is the average revenue per transaction still strongly influenced by this mix? Can you please give us an idea of average revenue per transaction versus 2019 excluding the vehicle mix? Thank you.

Thanks, Nabil. The heavy vehicles has grown business pre-pandemic, light vehicles are also at the same levels as pre-pandemics except on the pick and we're expecting to recover that traffic once the offices and the schools are hopefully back in September, with respect to the mix, we do not provide that breakdown. But we can share the last part of your question with respect to the comparison with 2019 and that mix with respect to the revenue per transaction versus 2019 is kind of one-third from the mix of vehicles, and two-thirds come from toll rate increases. Thank you. Begoña Morenes: Thank you, also from Nabil about Schedule 22, could you please provide details as to what exactly triggers the end of a Force Majeure event, does the 407 ETR need to recover to pre-pandemic traffic of the majority of the network or of the sections and for how long and what is the pre-pandemic reference exactly, thank you.

Thanks, Nabil. The company and the province agreed that the force majeure event terminates when the traffic volumes on Highway 407 reached pre-pandemic levels, measure as an average of 2017 to 2019 407 in the interchanges or when there is an increase in toll rates, or user charges, that's basically the agreement that we have reached and if any of those two things happens, upon the termination of the force majeure event, the company will be subject to Schedule 22 payments, commencing the subsequent year. Thank you. Begoña Morenes: Thank you, Pedro, the last question from Nabil. Net working capital consumption seems to be lower than the seasonal drag that we have seen before. What is the reason for this?

Well, in general, I would say that the collection performance or days of sales outstanding in the services division has been outstanding. I would say that in construction is more similar to what we've seen in our places, but in general, we see that public clients are really paying well, I mean better than in the past, so probably there's kind of a trend for keeping that sort of liquidity and good payment terms. That has been the main help also in services in the U.K., we were expecting to have to pay back some of the VAT and other taxes that were delay last year that also has been postponed, so that that has also helped. But I will say that the main component is a good very short days of sales outstanding in general. Begoña Morenes: Thank you. The next set of questions come from Tobias Woerner from Stifel. First question, can you give us a bit more color on the opening steps in Canada also in terms of dates. Thank you.

Thanks, Tobias, well Canada has started the three different stages, the reopening started in June the second as far as I recall, we started a few days ago, the final stage of the reopening and then in mid-August. So after that we're hoping to see almost full reopening of the country assuming that also schools are going to be open 100% physically and also hopefully to see a lot of offices coming back physically as well. Thank you. Begoña Morenes: Thank you, Pedro. The next question also from Tobias, the 2.4% construction margin would be where, when adjusted for all of the one-off effects?

Thank you, Tobias, again justto beclear, the 2.4% in EBIT doesn't include any surplus of the divestments of [indiscernible] or the real estate business of Budimex. So the only one-off effect included in the number is Ernesto mentioned at the beginning that is a €50 million margin with a real estate business that was adjusted in the consolidation once the business has been sold, must be included in the construction business. So excluding this €50 million, the 2.4% will be around 1.9% EBIT, I mean so in the trend of 3.5 that we will get in Horizon 24 in 24. Thank you. Begoña Morenes: Thank you, the next set of questions come from Patrick Creuset from Goldman Sachs. How do you intend to use your significant net cash position, especially including the announced divestment proceeds and what is the scope for increased shareholder remuneration and potential timing for a clearer dividend buyback policy?

Thanks Begoña, thanks, Patrick. Well, here the preference that I mentioned before is that to create value from an industrial investment point of view, of course that value creation the gets reflected in the increased shareholder distribution along time, being specific now is something we're not doing, we're looking at different things and potential for investment on the wake of the pandemic and we cannot be more specific at the moment. We'll try to provide more clarity as we clinch investments and materialize the divestments but not for now, apologies for that. Begoña Morenes: Thank you. The next set of questions come from Marcin Wojtal from Bank of America. First question was, is your dividend policy for the NTE and LBJ, where they distribute 100% of their free cash flow?

Thanks, Marcin. We don't have dividend policy for NTE neither LBJ. We need to comply with the financial covenants when we pay the debt service that comes under the month of June and December and based on the performance of the assets and the decision of the BOD, the Board of Directors we decide on the levels of dividends to be distributed, but there's no dividend policy per se. Thank you. Begoña Morenes: Thank you, Pedro. Also from Marcin, do you expect any of the cost savings that have been achieved in your toll roads in the last 18 months to become permanent?

Thank you, Marcin. We constantly looked for efficiencies in our operations. But as traffic recovers, most of the traffic related costs should go back to pre-pandemic levels. There's different scenarios and different asset is not the same for all for them. But I would say that it will be the abroad answer to your question. Thanks. Begoña Morenes: Thank you. The next set of questions come from [indiscernible], first question could we see price increases in the 407 ETR already in 2022?

Thanks, Alexis for your question. Remember that as we have explained the way it works with respect to the Force majeure event that give us the possibility not to enter into in any Schedule 22 payments also is related to our ability to increase prices, perhaps it's too soon to understand whether we're ready to increase prices in 2022 and then face potential Schedule 22 payments, but we're constantly monitoring traffic performance in the facility and main alternatives and making estimates of the Schedule 22 payments as I mentioned before, if we see that there is a market value on increasing toll rates versus accepting Schedule 22 payments it will be analyzed and obviously considered. Thank you. Begoña Morenes: Thank you, Pedro. The last question from Alexis, could you give us some visibility on Greenfield or Brownfield projects or M&A pipeline over the next six months? Thank you.

Hi, Alexis this is Pedro, I'm going to give you some brief or additional visibility on the already mentioned with respect to our pipeline in the U.S., I mentioned some of the projects that we have been pre-qualified in Florida, in Louisiana trying to find those who are pre-qualified in Pennsylvania and waiting for other high complexity previews coming up in the part of lanes from some of other states, we're quite positive that that is going to happen. Outside U.S., we're following also opportunities in LATAM particularly in Peru and Colombia with spacious doors or certain 78 as well as other projects in Europe, particularly in the U.K., and some other alternatives in Australia that has been also called market outside are primarily marketing, which is North America and we are holding to, we're operating to different concessions there in Australia, let me give the floor to Iñaki to comment on the rest of the pipeline. Thank you. Iñaki García: Yes, more than the pipeline, regarding M&A transactions and I think it was mentioned in the previous conference call, we're looking carefully I mean to bolt-on opportunities in transaction particularly in the East Coast of the U.S. And also, we mentioned that Budimex taking part of the proceeds of the sale of Budimex and [indiscernible] we're thinking inexpanding probably in FAA service, I mean the service division but also analyzing opportunities in energy and maybe looking to other opportunities in closer markets or closer countries to Poland. Thank you. Ignacio Gastón: Hello, Alexis, this is Ignacio Gastón from Ferrovial Airports. Just a few comments from my side on your question on pipeline, just confirm that we're monitoring the market, there are opportunities on lower basis, we're indeed working for additionally we're doing preliminary work in several projects that once done, progresses for COVID, this would be unwinding. With respect to specific opportunities, Brazil is producing a very active pipeline with respect to privatization and potential retenders and we're also following opportunities in Asia, Turkey and the U.S. should opportunity arise. Thank you.