Ferrovial SE

Good afternoon, everybody, and welcome to Ferrovial's Conference Call for the 2019 First Half results. Both the result report and the presentation are available to you in our website.

If you have any question, you may ask them through the form included in the webcast, through an e-mail through our ir.ferrovial.com, or via this conference call in the Q&A session at the end of the call. With this, I will hand over Ernesto López Mozo, Ferrovial CFO, who will be leading the call.

Thank you, Ricardo, and good afternoon, and thank you for attending this call. First, I will start with the highlights of the first half.

We have the strong performance of the 407ETR, with EBITDA growth above 7% and the traffic impacted by worse weather conditions compared to last year. I mean we kind of told you that July is looking better.

We have to monitor the traffic throughout the year, solid performance as I mentioned. Regarding the Managed Lanes, in Texas, performance was boosted by new connections in the Dallas-Fort Worth area, and we have very solid growth in terms of financial results of growth in traffic.

In Heathrow, we have record traffic of 38.8 million passengers. That is 1.8% up from last year.

And we have the expansion master plan consultation on runway 3 already launched. In Construction, we registered a provision in the first quarter of €345 million at 100% for projects in the U.S.

expected losses. In the second quarter, there have been some slight additional losses in projects that are outside the U.S.

And now we are working on the execution, concentrating focus and looking at improving all the bidding and performance. Moving on to the different areas into toll roads in the next slide.

We see that Managed Lanes are driving the outstanding EBITDA growth of the division, 47% in like-for-like terms, with more than 60% coming from the U.S. Also, an idea of the performance and quality of the assets was the sale of Ausol, for we have reached an agreement to sell 65% of Ausol for €447 million, and agreed at call and put option for the remaining stake, 15% remaining.

The equity value extrapolating off this, 100% equity value would be €688 million. That is around 60% above the analyst valuations.

The deal when closed, that is expected before year-end, we should record a capital gain of €474 million. And this includes the fair value adjustment for the stake we keep ahead of any call or put execution.

The cash is expected to be received before year-end. As I mentioned, the closing should be before year-end.

The transaction is just subject to the customary and regulatory consents and approvals. So no further impact beyond this in terms of the P&L and cash flow in these results.

No impact on these results as I said. Okay, so if we move on to the specifics of the 407ETR.

In the next slide, we -- I would like to focus on the following points. Performance in the second quarter has been very solid with EBITDA 8.9% higher despite rain and colder weather.

And this is, of course, on top of the first quarter also saw that kind of effect. When we look into the profitability, we have to bear in mind that in 2018, OpEx was impacted by a favorable effect of a one-time recovery of indirect taxes.

So OpEx really is only growing at an underlying rate of 1.1%. While the margins are outrageous in that the second quarter is around 89% in EBITDA margin, always there is seasonality effect, and the first quarter is lower in margin than the second.

In terms of the first half figures, the other thing I would like to mention is that we are recording longer average trip length. That is helping.

And July, as I said in the introduction, is showing also good results. Dividends grew by 10.5%.

So the total for the asset was CAD 500 million. And the July board meeting approved the third quarter dividend of CAD 250 million.

Okay, so the asset keeps being in a -- delivering mood and shows a very strong financial position. Finally Ferrovial, as we mentioned before, is interested in exercising the right of first refusal for a 5.2% stake in the 407ETR that SNC-Lavalin is selling.

You know that this exercise is subject to a judicial resolution for interpretation of the contract among the different parties. We had the first hearing in June, and we don't have visibility as to when it can be resolved, okay.

If the resolution is finally in our favor, we should have a cash outflow of around CAD 1.6 billion for this stake. Okay.

If we move on to have a little bit more color on the weather I was mentioning. And you can see in the comparison between last year and this one that the conditions were clearly worse.

I mean first during the first quarter, there were several severe weather events that took place involving freezing rain and snowfall. 5 major winter school closure days, that implied bus cancellations, and there was none, nothing of this in the previous year.

And also days with freezing rain, that also keeps traffic down. In the second quarter also, there was heavier rain and coldest weather in general.

But I mean I don't want to focus only on weather. Weather has played a major role, for sure.

Also we are seeing economy a touch softer. I mean business and consumer confidence is lower.

So probably the growth in GDP will be lower this year than initially forecasted in the region. But as I said, the outlook in July is looking good.

Probably July will be the best ever. So we will keep monitoring that.

The dynamics of the asset keep being phenomenal. In summary, it's a place where business and population grow in the area.

Okay. So we can move on now to other parts of the toll road division in Cintra, and the next slide shows the outstanding performance of the Managed Lanes in Texas.

In the second quarter, we see that the NTE grew by 42% and EBITDA by 21% in local terms. And we see that the North Texas economy remains strong and diversified and continues to outperform the larger U.S.

economy. Unemployment in Dallas-Fort Worth is at its lowest levels since the spring 1999.

It dipped below 3%, and the state rate is 3.5%, and the overall country is 3.6%. And it's a five decade low.

The corridor is really key from a commercial point of view. And the I-35 West, this connects Mexico and Southern Texas, is the more direct north-south connection for long-haul trips.

And we have to look at the area in more detail and talk about the Alliance area development. It's a very important logistics center to the north of Fort Worth.

Many huge companies and logistics companies are located there. We have logistics centers and warehouses from Kraft Foods, JCPenney, FedEx, Walmart and LG.

And also Amazon has 2 fulfillment centers in the north and south of the airport, among other many centers that we see in the area. And we keep seeing commercial traffic outperforming.

In terms of real estate also, Fort Worth is a city that is spreading to the north, and much of that land is owned by Alliance Hillwood. And this strong population growth is expected in the region and should translate into a significant increase in traffic over NTE 35 West in the long term.

In the first half of 2019 rather than the quarter, NTE EBITDA grew by 45%, benefiting from the opening last year of the NTE 35 West and the SH 183 that connects to the east to Dallas directly. I mean, the NTE segment 2 connects to that.

Also in LBJ, EBITDA grew by 24%, boosted by high traffic in segment 1 to the west. That is also the one that connects with SH 183.

Okay. So growth in LBJ is lower than NTE because the segments to the east run into congestion.

I mean as I mentioned in previous calls, the works for that should take place along the coming years, eventually ease that congestion point, and then should mean that the value of the asset and the growth should resume in earnest there. In terms of the other connections that are happening, and this is the main point I want to mention, and then move on to the Managed Lanes most recently opened on the next slide.

That is the I-77. Okay.

So the I-77 even though it opened, is a partial opening, still segments to go. But the partial opening already shows that the corridor is improving with the opening of the asset.

Average speed in the morning peak is up by 18% in the corridor, and the afternoon peak also improves by 37%. Okay.

So the highway volumes have quickly recovered the preconstruction levels. We are applying discounted promotional rates.

And the Managed Lanes of traffic is growing at 20% in each of the first 4 weeks of operation. Transponder penetration here is lower than in other regions.

We are talking about 40% of users with transponder. Okay.

So we have also included a video link, so that you can get more information on the asset. As I said, we will be updating more when we open.

And after some years of operation, we can discuss more how it looks vis-à-vis our perception. So far, it's fine.

Okay. So now it's the turn to move on to airports.

And while Heathrow already published, so I will just focus on a couple of slides here. The record high numbers in passengers that Heathrow achieved with record passengers in the first half, 1.8% up from last year, and also retail revenues following that growth with a 3.4% increase.

In terms of financial performance, it's robust. The passenger growth and retail performance helped generate a 4% increase in revenues.

And the adjusted EBITDA grew by 7%. Of course, this is boosted by the implementation of the IFRS 16.

If we exclude that impact, that brings lower operating costs. The growth in EBITDA would have been 3.9%.

In terms of aeronautical revenues, helped by higher traffic growth in particular in long-haul. It's benefiting also from recovery from prior -- yield dilution in prior years.

And the aeronautical revenue per pax is at £22.48 at the moment. Adjusted EBITDA that I mentioned rose at rose 7%.

The exact number of lease cost operating leases in the past that we have taken out is £26 million. Now this goes to the amortization and financial costs line.

So the net impact is not meaningful. In terms of dividends, Heathrow paid out in the first half £200 million.

This compares to £228 million last year, so it's lower. But Heathrow is just waiting to see how the traffic and the performance evolves ahead of Brexit.

I think that from an operational point of view, our airlines are in much better shape than what we initially forecasted. But we have to wait to see how this evolves.

In terms of expansion, moving on to the next slide, we talked about sustainability. And Heathrow is advancing on its Heathrow 2.0 sustainability plan, which has 3 main targets: carbon neutral airport operations from 2020; zero carbon airport operations by 2050; and carbon neutral growth from the new runway.

Among the achievements reached by the airport, I would highlight Heathrow is in line to have its entire fleet of cars and vans as electric or plug-in hybrids by 2020. It has over 100 electric vehicle charging points today, this is the end of 2018, and 72 electric and plug-in hybrid vehicles in its fleet.

60% of movements by aircraft are in the quietest category. Heathrow is incentivizing quieter, less polluting aircraft by airlines and has offered a year's free landing for the first electric aircraft to operate commercially viable flight from Heathrow.

T2, terminal 2, is entirely powered by renewable energy. Okay.

So now let's move on to the next business, that is Construction. And as we announced last quarter, we took a provision of €345 million for future losses in U.S.

projects. In the first half, we have recorded an EBIT for the whole division of €346 million.

That is slightly below the €332 million recorded in the first quarter. This is linked to, of course, very strict cost recognition, prudent recognition.

We have carried out a number of negative adjustments at Ferrovial Agroman level. And these adjustments related to works pending sign-off, insurance claims and compensation events.

So we are taking the costs. We are not recording any revenue for this.

Also, and this is more technical, costs related to central overhead costs are distributed to individual projects. When you take a provision for future losses, there was an interpretation of IFRS from IFRIC on the costs that you can include in this calculation.

And you can only take into account costs specifically related to the project, not overheads that are usually absorbed by a fee in our business. Here, the impact will remain as long as we wouldn't have other projects that absorb the fee, or we take some efficiencies to reduce the amount.

So Nubaglo that would be coming in with better prospects, and we will talk about them when we close them in the second part of the year, should help to ease this workload. And also, anticipating one of the questions to this regarding the performance of Construction, what could be expected for the whole year?

I mean we can say that it should be around these levels. So the second part of the year should bring for the whole division no improvement or worsening.

That's our best estimate now. Of course, there's opportunities and risks in this, but it should be fairly assessed.

Okay. So if we move on to Services.

Here, of course, you know that it has been classified as a discontinued activity. But I guess it's worth just stopping to talk about the divestment process, and also an update on the performance of the business while it is being sold.

Well, we have two separate sale processes. That is something that probably was not decided beforehand.

But Amey has been engaged in discussions, negotiations, to exit the long-term contract with the Birmingham City Council. And now that it has been sorted out with a derisked and clean exit, it's working on the due diligence preparations.

The momentum of the other part of the business, Spain, Broadspectrum and the international part of the rest of the world, is finalizing due diligence and should have binding offers coming. So we shouldn't slow the momentum of that part just to wait for the Amey process.

In terms of the Birmingham agreement, well, this deal has no impact on the P&L of the group at a consolidated level. And the terms of the exit agreement by Amey is to pay £215 million.

£100 million of them already took place in the first half. So you will see that is affecting our cash flow number.

And there's a £30 million installment, a couple of them this year, September and end of the year. So the total for 2019 will be £160 million.

And then you have £55 million over the next 6 years. It's basically payments of 10 years, except for the last one.

That is £5 million at the end of the first 6 months of the sixth year. Okay.

In terms of operations, it will remain operating the contract. And the, let's say, the maximum date of operation for this, if the client extends it, would be the end of March 2020.

Otherwise it would end in September. Okay.

So if we look at the performance of the division, it's quite robust. We have revenue of -- growing 11%, EBITDA 9%.

And we have a lower order book basically because we have taken out the Birmingham City Council project figures. Spain is up 3% in revenues and EBITDA 5%.

Profitability expansion is driven by more tons of waste treatment. In U.K., revenue is growing a lot with a stable EBITDA margin.

It's growing 23%, as I said with a stable EBITDA margin. In terms of Broadspectrum, revenues are slightly down 4% on portfolio streamlining, but it's improving the performance at the end of the 6 months.

In terms of international, clearly the star of the portfolio with revenues growing by 31%. And with EBITDA and profitability expansion, you have 7.7% margin versus 4.5% in the first half of 2018.

And the order book is growing, thanks to road maintenance contracts in North America. Okay.

So moving on from this Services division into the detailed P&L. We have the following main figures at the consolidated level.

We have revenues that are down by 5.3%, with lower contribution from Construction. That has declined 8.6%.

EBITDA impacted by the provision that I mentioned, but also helped by IFRS 16. That is improving with a reduction of operating costs of €16 million.

So it's fairly small in the continued activities report, only 1-6, €16 million. Then depreciation is growing because of the IFRS €16 million impact that I mentioned before.

In terms of impairments, it's really the prudent approach we are taking to our net worth in the Autema toll road. You know that Autema toll road is in a process claiming a restatement (sic) of the conditions prior to the unilateral change of the conditions of the concession.

But in the meantime until that is out, we keep providing for the net worth of that toll road. In terms of financial result, at the infrastructure level, we see higher expenses.

But this is due to having the activity with NTE 35 West that before opening was activating -- capitalized in financial costs. Then in infra projects, we have a positive evolution and also helped by the hedges on the share price, helped by the performance of the share price.

In terms of equity accounted results, the main comment is probably with Heathrow. The 407 is €62 million, higher than last year.

Heathrow is lower than last year, pretty much breaking even. And this is affected by the current move in the inflation curves so in terms of the growth of the asset and the delivery.

And this is great news because if that inflation that has gone up close to 4% in the curve in the next 3 years should be boosting the performance of Heathrow and delivering, as I said in the comment, 3 years if it materializes. I mean this is the movement with all the talks about a potential no deal.

Then in taxes, I won't extend myself. It's pretty much on line, if you look at the difference in the amount of 19% corporate tax rate if you take into account the different ones around the world.

And then you have the net profit of discontinued operations, I would like to mention is also helped by the non-amortization due to IFRS 5. When you classified discontinued operations held for sale, you don't amortize the assets, and that is helping the result.

In the end, we have a net income of just minus €6 million and should be recovering in the second part of the year as I mentioned, helped by the disposal of Ausol's capital gain and the improvement of the business. If we move into the net cash evolution we have excluding infrastructure projects, we posted €482 million of net cash versus €1.2 billion at the end of 2018.

The main drivers of this change in the net cash position are first, we have the dividends from projects, €244 million compared to €307 million last year. Here, I should point out that last year, that was an €81 million dividend from concessions in the services project.

And in the first half of 2019, if you take that effect out, dividend from toll roads are increasing by 10%. Here we should also mention again that at the end of the year, we expect the first dividend from NTE, and then the operations are looking good.

Probably we would have -- we should have a good positive surprise in the dividend from this toll road. And of course, we would also be looking at the potential from both Heathrow and the 407 because both assets could be delivering more than expected, okay.

So we will have to keep an eye on that possibility. And then we move into the operational cash flow from ex infra projects.

Here we have the negative EBITDA impacted by the Construction provisions of €345 million. Of this provision, the cash outflow has been €56 million.

In terms of the rest of the working capital evolution, we have the seasonal consumption at Budimex and also Amey ex Birmingham. Birmingham cash outflow was €142 million.

And this is a combination of the operational costs of that contract in this first 6 months and the payment of the settlement, the first payment that is £100 million. Okay.

So really in the rest of the year, we should have as I mentioned before, another £60 million from this settlement. Also in terms of investments, we invested more this year than the last, €114 million versus €87 million with no significant divestments.

And please remember that also will come -- should be coming in the second part of the year. Okay.

So I mean the rest is not worth mentioning, the rest of the captions of the cash flow evolution. And we should be moving then to the final remarks ahead of the Q&A session.

In terms of Managed Lane performance, just highlight the continued boom of those assets. In Heathrow, a new record high, supported by higher passenger satisfaction, important to mention that with the comparables.

Then the Ausol transaction with a price 60% above consensus, has shown the market appetite for infrastructure assets, and probably the kind of deal compression we are seeing all over the world and the kind of required return that financial players have for these assets. Then 407ETR has posted a solid performance with EBITDA 7% up and dividends growing 10.5%, despite weather affecting the traffic.

Okay. Then we have the net cash position of €482 million before positive inflows expected.

And we are not talking here about the services divestment that probably will materialize in 2020 because of the needed regulatory approvals. And finally regarding Construction, we are working to improve the outlook here.

I mean the focus on risk is top priority. And we are looking for this division to help acquire high-value infrastructure assets with a good balance of risk and derisked construction.

And finally, the binding offers for the Services division are coming in, except Amey. That will take a little bit longer.

So that's the whole rundown I was planning to make. And we move on to the Q&A session.

We have some questions that have come in, in writing. So I would take the opportunity to maybe start with those ones.

Okay. So the first question we have received in writing comes from Olivia Peters at Macquarie.

The first one is can we have an update on the timing of the services disposal and your priorities for the use of the proceeds? Well, I already covered that on the presentation.

Due diligence is being finalized, and we should be getting binding offers in the coming weeks, okay. So it's looking in good shape.

Use of proceeds, nothing different from what we mentioned in the past, priority to invest in value-creating infrastructure. We could have other uses like shareholder remuneration or even debt reduction, but the priority as I said is investing in infrastructure.

In terms of just Construction, the question from Olivia is what has Cintra Agroman learned for future infra bids from the I-66 and I-77? Well, many things that I already mentioned in other calls and in some meeting with you guys, but let me try and summarize those.

One of the things is that the size of these projects calls for a greater weight of self performance, e.g., the risks, the projects, rather than being too independent on subcontractors. That's very important.

More detailed design earlier, that also helps to narrow the time span between winning the bid and getting final prices. I think this is a key component as well.

And in general, also taking into account some sort of factor of the business cycle evolution that can be specifically squeezing subcontractor or resources availability. Okay.

With all these in mind and with the engineering capabilities, we should be able to perform well. Of course, there's also in the combination of Cintra Construction, there's also items regarding the geotechnical risks, delays and so on that are not in the hand of the contractor and the concession operator to sort out, to avoid these risks somehow with a guarantor.

So I think we have a good prospect of what is needed. And I mean we're looking for delivery of more great assets in the infrastructure space.

The third question from Olivia is what significant changes have you made to prevent future write-downs at Construction? For example, have you made changes to your risk systems?

Are you comfortable this is the end of the write-downs in Construction? What portion of projects in your order book have you reviewed?

Okay, I'll start. Well the first part, I already addressed.

Much of the trouble comes from the initial stages, the bidding. And second is design, design, design, speed of authorizations and also owned resources.

So I think that from a risk space point of view to put in future write-downs, I think that's the main item. So it's covered in the first answer I provided.

In terms of projects of the order book reviewed, we keep reviewing all them on an annual basis. And for any results in particular year-end and these first 6 months, we have controlled reviews of estimates coming from the different projects.

Of course, these are very long and you always have to monitor. There could be some unforeseen events and so on.

But it has been reviewed. As I said, we are not planning for a recovery of results in the second part of the year, even though there could be some opportunities.

And we think that we are covering this space. Of course, controls are always key, and we should be doing more and more on a continuous basis.

Then in terms of operating cash flow, that is the last question from Olivia, is a negative €409 million versus -- operating cash flow, I mean, versus a minus €69 million in 2018. Do you still expect a cash outflow from Construction of €300 million?

Or is the guidance ambitious given the ongoing problems at Construction? Well, in Construction in the second part of the year, we should have inflows from new projects that should be getting the closing and the advance payments.

You have the seasonal push that you have at the end of the year, in particular in Poland. You also have that in Spain and in general in more countries.

So yes, you should have that. We have to keep an eye on that.

So I won't be providing much of a specific guidance, but the ballpark number could be around the one that we provided. As I said, there's positives and also potential risks, but the number I want to leave you with is the same that we mentioned.

That's it from Olivia. And we should, I don't know -- we are not getting more written ones.

Of course, you can keep sending them if you prefer in writing. We open the floor for the operator to give the cues.

Can I start with Heathrow and the fact that the Brexit contingency has been reduced? And I was wondering if it would have an impact on the dividend that we should expect for the year from Heathrow?

That's my first question. Second question would be on the news that we've seen from the CNMC in Spain, which has opened an investigation into bidding for roads for potential practices that may have restricted competition.

I was wondering if you could comment on that news? And my third question would be on Construction.

Sorry to ask, I know you talked about that a bit. But can you clarify the guidance that you are giving for H2?

And lastly, sorry if I missed that, but do you have an update on the 407 stake sale process?

Elodie, okay, thanks for the questions. It's four of them, let me go through them.

The first one is the Heathrow dividend. Well, Heathrow in their interim report, they reiterated the guidance.

They have commented on £400 million full dividend for the whole year. As I mentioned before, the Brexit contingency has been reduced because airlines are more ready to fly.

So the impact from passenger should be less than initially expected. And yes, it should be smoother.

Let's see how it goes. And at the end of the year, Heathrow will comment on the dividend.

One of the things that also could be helping us I said is the levering from inflation that comes with this kind of Brexit uncertainty and the pound devaluation. So no, we don't see risk of dividend payment.

We see more opportunity. But as I said, it's something that will be exposed by Heathrow at the end of the year.

Then you mentioned on the initial investigations of the competition commission regarding road maintenance. Well, this is a wide sector investigation.

All the companies are there pretty much for that. I mean the main ones that have been in the last 15 years, and also the ministry of public works.

So is initial stages, and we don't have any comment to make. It's the whole sector.

Regarding the Construction guidance, we said that we have recorded a loss in this first half and that this same number is our best estimate for the full year. So even though there's opportunities for improvement, there's also some risks.

We prefer to look at the number in that regard. So around this, the number we have published in the first half is like if the second half was 0 result, okay?

And then you asked about the 407 stake process, yes, I covered that in the call. Well, we are waiting for the review from the judge and see how they found about this process, we don't have an idea of timing, I'm sorry.

We don't have visibility on that. And we'll update the moment we get the information, obviously.

So I think, Elodie, I think I covered your questions. Let me know if I missed something.

Okay. Operator, probably before taking the next question, we have another one in writing, coming from Marcin Wojtal from Bank of America Merrill Lynch.

And these are the questions. Do you have plans to still publish your internal valuation of the toll roads portfolio with detailed projections for the main assets?

Is the publication hold until there is clarity on the 407ETR potential stake increase? Well, we are discussing internally.

We haven't taken a final decision yet. Of course, this is an information that is sensitive even for other businesses that we could be publishing.

So we are discussing the release of this information, is something that we should provide clarity to the market after the summer, I guess, probably after the potential stake increase in the 407. The second question from Marcin is, as Construction continues to be somewhat challenging for the quarter, would you consider perhaps exiting some countries, regions or segments to reduce the size of the Construction business in order to reduce the risk profile of the company?

If we could consider this, yes, we could consider this. The focus is clear for this and where we have to deliver.

But we don't have any specific comment on that. But yes, we could consider that.

And I think this is all -- these are all the questions from Marcin. So we open the floor again for the phone queues.

Sorry. I have three questions if I may.

The first one is regard to Construction. And if you could quantify the additional [indiscernible] impact of negative adjustment at the [indiscernible] work you're doing for the quarter [indiscernible].

If I [indiscernible] correctly, you expect [indiscernible] for construction activity in the second half, is that right? Second question [indiscernible] reported construction during the first half.

What is your expectation for full year? In other words, if we can assume that all the construction will be recovered in the second half or not?

And last question, [indiscernible] close to €300 million [indiscernible] as was mentioned by the local players [indiscernible] was completed, because looking at net cash of service units [indiscernible] when compared with Q1 and now one additional one from €55 million net cash position [indiscernible] what is the amount [indiscernible]?

Felipe, the sound was very poor. I got the first one.

Probably -- I mean, if you could send an e-mail to the IR e-mail address, that would be great and we could make sure that it gets answered with precision. I mean you were asking about the detail on the results on Construction this second quarter?

I won't be specific about the name of the projects, but I would mention some stuff here, right? So we are talking about works in Portugal, for instance, that are -- we are incurring €10 million additional cost.

And yes, we expect to be asking for compensation on those. We have recorded the cost, not the benefit.

Also, we have some works in Australia. I won't mention the specific project where we are doing works ordered by the client, but not signed off.

This is something that we should recover with final certification, as I said, something like €6 million. Then we have other 2 where we have are taking €14 million and €4 million provisions, and here also, we think that we have some extra cost incurred, which should be compensated for, but it's something that these claims had to be validated, signed off by the client, right?

So this is the bulk of the things that were recorded here. And also, as I said, we haven't charged to the projects some overheads and that this could change a long time with new projects.

And this is around €5 million that is additional cost. So this is the bulk of the result in Construction for this quarter, okay?

So regarding the rest of the year, as I mentioned, we expect the second part to be providing 0 EBIT the second half of the year, right? So that means -- but as I said, this is an estimate, and therefore, the result for the full year should coincide with the first half, okay?

I'm not more specific, I would ask you, Filipe, if you could write them down, because the sound was really poor, and I didn't get anything else. Well, sorry, I got just a question on the services cash evolution.

It makes no sense to discuss the cash evolution. The cash evolution will have to be discussed or adjusted in formulae.

It depends with the buyer of -- or buyers of the asset, right? So I wouldn't get into that detail at this point in time.

So please, if you could send that over, if that's okay with you, Filipe? Okay, well, thanks, Filipe.

We're just waiting. If you have further clarifications, we can take them on the e-mail.

Okay. So I would be moving to another bunch of questions we received from Stephanie D'Ath from Royal Bank of Canada.

Well, the update on the 407ETR potential stake. I already mentioned, the 407ETR dividend growth rate deceleration from DD to 7% in the third quarter.

But -- I mean you mentioned because of traffic, it's lower. What are your mid-, long-term dividend growth expectations, please?

Well, in the end, you see that dividend follows the operational performance. Traffic is improving, but I wouldn't take that as the final guidance for the dividend, because it's also true that is in a very solid financial position.

So there should be discussion among shareholders to see what is the final dividend, because there's room from a financial point of view. And as I said, also traffic is improving in July.

Okay? So I think that the dividend path, we are very comfortable with the numbers provided in our models in the past, and we -- I mean we've remained really comfortable in that path going forward.

Then the last question from Stephanie is an update on the Heathrow regulation. Well, in this second part of the year, after the summer, we have also comments from the CAA on how they view returns, also comments on different initiatives or the look at commercial agreements that they encourage.

They should be commenting on the economic framework for expansion. You know that this interim period is already taken care of with a commercial agreement with the airlines, so up to 2021.

But the second part of the year, later would be providing more views on returns and other aspects. Regarding business plan, that is also key.

We will be looking at Heathrow, probably providing at the end of the year an initial business plan, that in 2020 in the first half should become more kind of final. Okay.

So there's moving pieces. And of course, this is such an important project for the country, all privately financed, that I guess it will have to find a balance between financeability and affordability, and we think it will be struck.

I mean bear in mind that we are discussing £2, £3, £4, £5 per ticket compared to other charges that are way different. Okay.

So as I said, more comments from the regulator will come in the second part of the year. I think I've taken care of all the Stephanie's question.

And now the -- we have another round of questions from Alexis Miller from Praxis Partners. So the first one is now cash outflow for working capital is negative €588 million.

Can we expect you to recover to at least minus €300 million this time? Well, the minus €300 million that is mentioned, we don't get into that specific details.

We just really comment on different items that could move the needle. And Construction could be closing projects where we have inflows.

Clearly, also while you do take into account the numbers from Services that is the numbers that I mentioned in the slides, there's always working capital recovery from collections from clients that certify milestones and pay at the end of the year. So yes, there should be improvements.

I wouldn't mention any specific number and nor I will mention for the fiscal year '19. I would focus again on the potential for better news from dividends from infrastructure.

The next question from Alexis is which business is consuming cash? Well, right now, Construction is consuming cash.

There is working capital consumption in Services also with the payment of the Birmingham contract. Services should recover the normal status of cash generation.

And Construction basically is consuming cash, as we mentioned, from the provisions we took in the first quarter. And it's not expected to improve, but not to be positive in terms of cash generation.

Then the second question from Alexis is how much provisions do you have accumulated to date that will result in cash outflow in the future? And here, the main one that I mentioned is the one from the first quarter, the €345 million that as I mentioned in the rundown of the slides, already €56 million have gone out in the first half, okay?

So we have less than €300 million on that specific provision that is a cash provision. Regarding the costs incurred this quarter, all of them are costs incurred.

So it would be an opportunity for cash rather than -- inflow rather than for outflow if we get certification signing off or compensation. Okay.

Then we have the third question from Alexis is the ForEx cash impact is minus €66 million is what currency is this? Well, probably we are talking about different levels, okay?

One of them is the hedges we have on the net investment are rolled forward. So that means that all the hedges we have in Canadian dollar or U.S.

dollar for our net equity position. That is fairly small.

We are net very, very long these currencies are rolled over, and every time there's a rollover, there's a cash outflow here, right? So we shouldn't expect something like this coming forward.

And now we should be materializing hedges we have in the pound investment, okay? Then the question #4 is your dividend from Heathrow hedged and for how long?

Yes, we have a good amount of hedges in pounds. In total, we have something like £500 million.

It's a mixture, I just hesitated a little bit, because it's a mixture of direct FX forwards and options on that, but the rough number is £500 million, okay? So there it should be okay.

We expect a lot of gamma in that currency, if I may. I think I covered all Alexis Miller from Praxis Partners questions.

We have -- okay. Yes.

Now we have Filipe Martins from CaxiaBank that is -- has sent his questions in writing. Okay.

So Filipe, the first one I already answered. I'll repeat it for the public.

Can you quantify the additional accounting impacts negative adjustments that you mentioned were booked during the second quarter? Okay, this I covered.

Then you have the second question from Filipe is after the €600 million reported consumption at working capital during the first half, what is your expectation for full year? Well, I already covered get on another question.

We don't provide detailed, both Construction and Services should improve. And then the main focus is the cash coming in from dividends and from divestments in infrastructure.

The third question from Filipe says if it's true that Ferrovial capitalizing intercompany loan of €300 million at Services division as mentioned by the press and when it was completed? Well, yes, this is a part of the close of the first 6 months.

So it was completed at the end of June. And in the end, between intercompany and equity, any amount we could receive would be coming from the divestment of Amey, right?

So it could be neutral between loan and equity somehow, right? So I guess, it was done at the end just to keep the net worth level of Amey for operational purposes in good shape.

The fourth question from Filipe, from CaxiaBank is from the total of €55 million net cash position of Services division, what is the amount related with Amey? Well, I don't have that detail with me here, but Amey should be in a net debt position at this point in time, not net cash, okay?

As I said, we are not providing specific details. This is part of the moving parts in the sale of Services.

Okay. So I covered all Filipe's questions in writing.

I have more coming. This one comes from Charles Maynadier from Kempen.

Two questions. The first one is regarding the 407ETR stake.

Could you walk us through the process time line after the court outcome? Well, it would be very quick.

I have Paco Clemente from Cintra here, but I think it's a matter of days when the process is out when you have to secure the sale.

Yes, that's true. It's only 10 days, 10 working days that we have to complete the transaction.

Okay. And then there's a follow-up question from Charles on this topic that says, is it correct that the cash out and stake transfer will take place directly, but could be reversed in case of appeal from the losing party?

And the question -- the answer is yes. I mean if there is an appeal, then you have to basically sell that back.

Will you appeal if you lose? Likely, we'll see.

In case the process could drag on for months, well, no, as I said, the process won't drag for months after the outcome of the current trial. Then the last question from Charles is in terms of the pipeline of infra assets, could you give us an update, where do you see opportunities?

Okay, so here I would pass on first to Paco Clemente, CFO of Cintra, and then some comments on airports, even though in airport, the main item is always Heathrow.

Thank you, Ernesto. Well, in terms of the pipeline, for the first time line of 24 months, we are -- we have screened between 25 and 28 projects amounting of €50 million investment.

25% of that could be potentially in Managed Lanes. We believe that we will be either bidding or completing the request for qualification process roughly in 5 projects during 2019, and the rest will be in 2020 and 2021.

Geographically speaking, 50% of the projects will be in the U.S., 20% in Europe and the rest in the rest of the world. More precisely, in terms of which will be the coming projects in the next -- in the very next future, we will have -- the first one will be the I-10 in Alabama, which we will be hopefully presenting our submission at the year-end -- this year-end.

After that, we will -- hopefully we'll be in the RFQ of the projects in Maryland and some of the projects in Georgia, all in the U.S. There are some other projects expecting in Chile and in Poland, but it's -- all of them are in less mature stage.

Thank you.

Thank you, Ernesto. This is Iñaki, CFO of Ferrovial Airports.

Well, I cannot give you very much details on process that are not -- whether it's not a formal process. But as you know, I mean, we are now focusing on the U.S.

market and we are in conversations with airports administrations due to the growing interest in [indiscernible] projects, also with airlines and private investors since we opened the office -- commercial office in Austin in 2018. Probably the only process that you have heard about is San Luis that we are looking carefully, but there are many others that we cannot disclose more details.

On Europe, we are following ADP. As you know, the process is on standby, waiting for the results of the consultation for referendum of privatization.

This process won't finish before March 2020, but we are working on that and building the consortium. And of course, I mean, the quality of the assets is something that we could be interested in.

And finally, I mean, we have opened a commercial office for the Asian market. We are going to have a look at what is happening in Asia, particularly in India, Indonesia, but I cannot give you more color on specific countries and assets.

Okay. Thank you, Iñaki.

Now we have also written questions coming from Nabil Ahmed from Barclays. The first one is, do you intent to publish a business plan for NTE 35 West?

If not, could you provide the guidance for fiscal year '19 for the main financial metrics? Well, what we just will do is wait for some years of operation until we publish a business plan, okay?

Here it's the same thing is -- well above our expectations also, and it comes part of the overall discussion that we were mentioning before regarding commercial reasons, okay? So we have to come to a final conclusion internally.

Question number two is a clarification question on Construction. You are talking about €5 million incremental cost taken in Q2, but that's the actual EBITDA loss in Q2 versus a normal positive EBITDA, which could have been in the €35 million to €40 million range.

So shall we understand that incremental to the cost was €44 million, €55 million in the quarter? Well, that's right, I already provided that answer in more detail in a previous question.

The third question is could you please reexplain why these costs cannot be booked alongside the provision in Q1? Can you be confident now such events will occur in the remainder of the year?

Well, the -- as I mentioned during the presentation, there was a consultation to IFRIC, the interpretation committee of the IASB regarding losses for -- future losses for contracts. And the answer to that consultation was that you should take costs specifically related to the project, not other like central overheads, right?

So the central overheads in the Construction division are charged to the different projects, right? When you get more projects onboard, you can charge more of that fee or you can take some efficiency initiatives, right?

So the growth in profitable contracts that some of them would be coming and we will be updating in the second part of the year should be taken part of this effect. Question number four, in Services, regarding the Birmingham contract, will the future settlement payment be executed by Ferrovial or by the future acquirer of Amey?

In other words, will this liability reduce the disposal price of Amey or stay with the Ferrovial group? No, there is no guarantee from Ferrovial whatsoever in this settlement.

So it is Amey's liability. Of course, Amey's liability is something that the acquirer has to handle, right, and taken into consideration.

And as I mentioned in different moments of the presentation, this settlement has had no impact in our accounts, because we took a very similar number in our fair value assessment. So that settlement is already part of the fair value assessment we took in the year-end of 2018 account.

Okay. So that takes care of Nabil Ahmed written questions.

I don't have anymore written questions. So I open the floor back to the operator.

Just one question from me, please. I just wondered whether you can talk a bit more about your definition of what is an infrastructure asset, which you're looking at to invest in.

Based on my understanding, you recently bid for some power transmission asset in Chile. And obviously, there has been talks about the French and Spanish fiber assets.

I just wondered whether you can go into that in a bit more detail on the scope and the size of [indiscernible] outside of the traditional toll roads infrastructure?

Well, thanks. Very good question.

Actually our focus is on transport infrastructure where we could have differential capabilities, and therefore, earn extra return. And you know that the market is flooded with funds dedicated to infrastructure investment.

So we need to focus in our differential capabilities. We have differential capabilities in terms of pricing the dynamic tolling in congested areas in the U.S.

That's our main focus. When we have the greenfield space, we can combine with Construction, and there is less competition in these projects.

So that's a key part in our strategy. Also in airports, we can derive from the know-how also in Heathrow and in our division to look for projects where we could have value added.

And the summaries that we are looking for transport infrastructure as the main priority, and that's what it should be. If other projects come that we think make sense, we could look at them, but really, really the focus, and the market should bear that in mind, is assets at transport infrastructure, unique assets where we could have our capabilities put into play.

Thank you. I have another written question.

Thanks for all that, guys. It's easier than when the line is breaking down.

So the -- we have a follow-up question from Stephanie D'Ath from Royal Bank of Canada. It says, could you please update us on timing of Amey disposal?

Having done much progress on, could we expect the sale by the year-end too? Well, here, the -- for obvious reasons, there was all these negotiations with the Birmingham City Council.

There was only some preliminary work. So the work is at full speed now.

And I'm not commenting on timing, because it's [indiscernible] we have to put a lot of information and it should be spilling into 2020 probably. But let's not stick to that specific date.

We are working to do it as fast and efficiently as possible. Okay.

So I don't have any more written questions. So I open the floor again for the telephone questions.

So two from me. And just regarding on Nabil's question on Construction margin.

Do you expect the EBIT to be flat into the second half? Obviously, it implies profitable in Spain, profitable in Poland, profitable at Webber.

You've got still some pretty heavy loss-making contracts. And again, I [indiscernible] to understand why you are provisioning all this [indiscernible] instead of waiting for the second half to incur these losses?

And then the second point is you are teasing us on the dividend from the infra assets? When we look at your starting point at full year '18 where you received €623 million, should we be expecting something more generous in terms of dividends from infra assets to be paid to the infra holdco, i.e., a bit of an effort from 407ETR, from NTE and maybe at the end of the year from Heathrow?

Okay. Thanks, Nicolas.

Okay. Let me take these questions.

Regarding the projects I was mentioning, as I told you, the concepts where we are taking the cost and not the revenue, and these projects where we have been asked or ordered to do things, but you cannot recognize in the accounting until you have a final sign off or certification, right? Other are events that we think are subject of compensation, but we are not taking the claim as, let's say, work-in-progress as many other construction companies do, right?

So our work-in-progress is very low in Construction. So we don't expect the contracts not to be profitable.

We expect them to be profitable, but the timing of cost and revenue recognition are not at the same time, okay? The reason I'm saying neutral is just to take a prudent approach, just in case signing off or claims don't come at the end of the year, okay?

But as I said, our expectation is that these contracts make a profit, otherwise, you are right, we should be taking the hit already. Regarding the dividends that you say we were teasing, well, the main concept in last year that made last year dividend higher in the first half was also one extraordinary dividend from Services concession on maintenance of highway called A2 in Spain.

What we have in the second part of the year -- this year is the NTE, okay, that we expect an improvement on the number that has been around, that is $125 million our share. Then we have Heathrow that Heathrow has guided for €400 million.

But depending on the Brexit inflation and so on, maybe there could be margin. That's something we have to wait here to see.

And then the 407, as I said, it's quite delevered. It has solid balance sheet.

So it's a matter of discussing with shareholders. So all these things could bring improvements to the main numbers that the people are -- the different analysts are discussing.

So I won't get into any specific number, because they are subject of discussion among different shareholders, many of them, right? So we will have to walk the path.

Next question, please?

Just wondering, a bit of a positive surprise on the I-77, €9 million of EBIT here. I thought it was just opened for June in the first half.

Can you make some comments on the performance of that asset? And how should we think about it for the full year?

Well, I will pass that on to Paco, just described, we have something like half of the whole length open. Construction was delayed a little bit for the opening of the remainder.

So let me pass it on to Paco for the update on that.

Thank you, Ernesto. Well, as Ernesto has mentioned, it's only 1 month of operation is still very, very early.

But I think that so far, the traffic has grown quickly. We have recovered -- we have recovered the preconstruction level of traffics.

The ability to speed has increased 18% on the morning, and in the afternoon 37%. We are, right now, for the first 6 months in a scheduled mode, which means that dynamic mode is still pending to be implemented.

It will be done hopefully on November. But so far, the 4 weeks that we saw so far is 20% each of the first week on operation.

And July traffic is in the same page. So we are expecting to open the remaining tranche of the infrastructure at the year-end, and it will be something that will improve our traffic.

And well, we believe that this roughly our summarizing, we are still very early, but it seems that it's according to our expectation.

But Paco, just with that one month, you've managed to do €9 million of EBITDA? So would it be reasonable to kind of assume at least for the rest of the year [indiscernible]?

Well, we are getting paid partially from liquidity damages from the contractor. So it's still very, very early to come up with -- which will be the revenues that we are expecting for the rest of the year.

So we need more time to see how the infrastructure is behaving. There's still a lot of work underway.

This -- we believe that it is this current user, they're preventing them to get use from the facilities. So still very, very early.

So it's all we can say in that regard, Robert.

Okay. But it's clean EBIT number.

There's nothing funny in that.

It's clean, Robert. But as I said, they are receiving damages from the construction JV, right?

So that is not, let's say, traffic-related profit. It's penalties on the construction delay that they are cashing in.

And can you say how much they were of the €9 million EBIT?

We'll update you on that. I don't have the exact number now.

We'll update you. Thank you.

Okay. So next question, please?

[indiscernible] mine would be on the alternative usage for the cash [indiscernible] thinking about mainly about [indiscernible]. The second one would be your comment on Europe [indiscernible] the appetite for these kind of assets indiscernible].

Is there any another one in your portfolio that you may consider [indiscernible] in the coming 12 months?

Thank you, Guillermo. The line was breaking down a little bit, but I think I got them.

The first question was that if we, though, are not successful in buying these -- taking the 407 that we are pursuing, if we could use the money to increase our participation in some of the Managed Lanes or other of our good infrastructure assets. Well, I don't know if we have the opportunity available, although it would be great if we could, because the dynamics are really positive.

But I don't think that we have the opportunity, to be honest. Then the other question is if we have other participations or assets like Ausol that could be subject of sale or reverse inquiries, we are not entertaining anything like that at the moment, okay?

So no. Also we'll see then, looking to redeploy the proceeds when we get them.

I don't know if I missed anything, Guillermo. Okay.

Thanks a lot, Guillermo. So I don't if we have any more call, definitely not in the IR inbox.

And I don't know if, operator, we have any other question, then we would be closing the call. Is there any other question?

Okay, thanks a lot. Thanks for attending the call, and we're looking forward to meeting you in the near future.

Thanks. Bye.