Hochtief AG

Thank you, Mike and the team. Good afternoon to everyone and thanks for joining us.

As you are aware – you are aware in the last few hours we have presented an unconditional offer worth up to €940 million to the minority shareholders of CIMIC. We work through the key aspects of this offer in due course.

But let me first of all start by describing the main features of our 2021 results. So let's begin with the key highlights.

HOCHTIEF nominal net profit of €208 million reflects the 195 million extraordinary one-off charge due to the outcome of Chilean project arbitration and compares with 312 million for 2020. Operational profit of €454 million rose year on year by 26% like-for-like.

This substantial underlying level of profit growth was driven by a significant increase in earnings at our Asia Pacific division and a strong rebound in the contribution from Abertis, as well as solid performances by Americas and Europe. Margins remain firm across our operating divisions with a group operational PBT margin of 3.3%, an increase of 40 basis points.

Pre-Abertis. HOCHTIEF’s cash generation improved with free cash flow from operations pre-factoring increasing by 10% year-on-year to over €700 million.

And the group ended the year with a net cash position of €556 million, up to €92 million year on year pre-factoring. New order were very strong, exceeding the €30 billion level and showing 36% year on year increase, reflecting our strong market position as well as the recovery from the impact related to COVID, particularly in Australia.

As a consequence, the Groups order book of €52 billion is up by 12% in the last twelve months. Moving on to slide 5, we can evaluate the positive momentum in terms of cash flow.

Net cash flow operating activities of €760 million was stable factory pre-factoring helped by a solid working capital performance. The regionally strong full quarter inflow of €680 million represents around 90% of the full year 2021 figure.

After accounting for net CapEx of €56 million, free cash flow from operations pre-factoring of €704 million is up by 10% year on year. The full year figure includes a cash dividend received from royalties in 2021 of €119 million and compares with €173 million in 2020.

If we adjust for the lower average dividend then free cash flow from the Group pre-factoring would be 25% higher year on year. In terms of factoring, this was reduced by €354 million during the year to €758 million and [indiscernible] at CIMIC is now complete.

Let's take a look at the cash development on the balance sheet. HOCHTIEF ended 2021 with a solid net cash position of over €150 million.

Looking at the year on year variation I would highlight that if we adjust for the change in factoring the net cash position would be €292 million higher than December 2020. The underlying increase in the group's net cash position is after €311 million in total dividend payments by the group.

On the slide 7, you can see how the groups orders have developed very positively. New orders have increased year on year by €8 billion to over €30 billion an increase of 36% compared with last year led by a strong growth in the Asia Pacific division and solid level of trade wins in America and Europe.

As a result, our backlog now stands at €52 billion, up by €6 billion users for 12% year on year. All our divisions show substantial increases compared with a year ago.

Half of our order book has been generated in North America with the further 41% in the Asia Pacific region and 5% in Europe. I would like to highlight that our older backlog has more than recovered from the impact of COVID and now it stands 8% above the pre-pandemic December 19 level.

On the Slide 8, we show some of our major recent project wins such as in our Americas division, Turner sustained its strong position within the UK [indiscernible] and was awarded amongst others a contract to deliver the Gateway project at the University of Berkeley. In addition, we completed the science and engineering complex at Harvard University, the building is shown on the cover of this year's annual report.

Turner was recognized in 2021 as the top construction management company for healthcare projects in the US or its delivery of well over US$3 billion of work in the healthcare sector. This year's order intake includes a contract for the new veteran medical center in Kentucky of $840 million as part of the joint venture.

And in transportation infrastructure, Flatiron was awarded a contract for the widening and rehabilitation of the I-95 highway in North Carolina worth $430 million as a part of a joint venture. In Europe, we were recently awarded a power tunnel plating Wales.

The contract is worth €240 million and will reduce the visual impact of the existing overhead lines upon completion. The British is for a repeat client and built upon work currently underway in London.

And CIMIC has seen very strong new orders in 2021, reflecting a strong multiyear fundamental demand environment as well as a recovery from COVID delayed project awards including several semi group companies are involved in the North East Link Primary Package, PPP, where the freeway network around Melbourne will see its missing link closed with a three-lane twin-tunnel. CIMIC shares -- share of work is value at AUD 3.8 billion.

And in December, CPB Contractors was selected to deliver work worth AUD 1.35 billion for the expansion of the Sydney Metro at the New Western Sydney Airport. Likewise, in Sydney CPB was awarded the Southern Tunneling works for the Western Harbour Tunnel in a joint venture.

There is a company UGL was awarded several multi operations and maintenance contracts for regional rail infrastructure, utility and renewable energy clients as well as the oil and gas industry. And now, let's look in more detail at Americas.

HOCHTIEF Americas delivered a robust performance in 2021 at withstanding COVID impact with stable profits in local currency terms accompanied by substantial order book growth. Sales of €13.8 billion were 3% lower than the corresponding period of 2020 on an FX adjusted basis with work done stable.

Operational PBT of €351 million was up slightly compared with 2020, and at the top end of our 2021 tight range of €320 million to €350 million with a solid margin of 2.5% versus 2.3% the previous year. The cost/business model of the division's construction management activities which account for the majority of the revenues at HOCHTIEF Americas continues to deliver excellent results.

The division generated net cash from operating activities pre-factoring of €343 million in 2021. The year-on-year variation is a consequence of project timing effects and normalization of the strong cash inflows from working capital in previous years.

The strong balance sheet at Americas showed a net cash position of over €1.5 billion at the end of December, up by €131 million year-on-year. At the end of the period, the order backlog stood at €26.1 million, up 15% year-on-year or 6% FX adjusted with an absolute increase of €3.1 billion since December 2020 to a record level.

The orders secured during 2021 of €15.3 billion were up 2% year-on-year in US dollar terms with work secured in the last 12 months representing 1.1 times work done. Looking forward, the market fundamentals for our key segments are moving in the right direction.

The US nonresidential market is expected to grow in 2022, notwithstanding supply chain constraints and the labor shortages with underlying economic growth expanding as COVID restrictions are lifted and more people return to the workplace. The commercial segment will provide opportunities as corporate relocations are expected to continue.

Even as a hybrid work models and remote work becomes common, commercial clients are remodeling and/or building new office space to include design elements, maximizing flexibility, safety and comfort for tenants. These changes will require construction or modernization activity.

Growth continues in the health care sector, as the pandemic has highlighted hospital capacity limitations, accelerating investment to address emergency scenarios. The aging US population will drive longer-term increases in health care construction.

The data center market continues to thrive with Turner well positioned to benefit from its strong technology client base. The construction of data centers continues to grow at a substantial pace, as leading data center services provide us invest in new developments and expansions.

Key drivers of this growth, includes 5G adoption, growing cloud computing and big data amongst products. Elsewhere, significant investment is expected as companies move to onshore manufacturing capacity to address supply chain disruptions and there is increased demand for clean energy solutions in areas such as renewable generation components, electric vehicles, battery production and semiconductors.

In November 2021, the U.S. administration signed the Infrastructure Investments and Jobs Act that provides nearly $1 billion in manufacture funding over five years from 2022 through 2026 with over $150 billion in new funding.

The bill includes funding in roads, bridges, broadband infrastructure, water treatment, renewable energy and climate resiliency presenting significant opportunities for both Flatiron and Turner. The North American infrastructure construction market is rapidly evolving in pre-delivery methods.

Collaborative delivery models where the contractor is higher based on qualifications at an early stage and construction costs have subsequently clearly offsetting are becoming more prominent. This provides stable low-risk project opportunities with a strong cash flow profile, such as the revitalization of the Los Angeles, Union Station and the re-concession on the bond side reaching Poland.

The water and wastewater treatment markets continue to be robust. Flatiron is well positioned to take advantage of these opportunities, we traditionally attract fewer specialized competitors.

Climate Change resiliency and sea level rise are also a major priority with numerous, sea wall, levy and flight protection projects plan across both coasts of the United States. The current administration has made mass transit links a priority with significant local and Federal Funds flowing to reduce dependence on cost and reducing carbon emissions.

These projects are largely located in markets where Flatiron has significant presence such as California, Texas and Washington. So the outlook for our well-positioned Americas business is very positive.

Operational guidance for 2022 is a pre-tax profit of €350 million to €370 million versus €351 million in 2021. Moving to slide 10, we have the Asia Pacific division with the CIMIC result published two weeks ago.

2021 saw revenues increased by 7.6% to AUD 9.7 billion driven by growth in Australian construction and services. Underlying net profit after tax NPAT of AUD 405 million compared with AUD 352 million in 2020.

EBITDA, PBT and NPAT margins were firm at 9.4%, 5.2% and 4.2% respectively. Operating cash flow pre-factoring for the 12 months period improved by AUD 603 million year-on-year to AUD 560 million supported by a strong fourth quarter performance.

The underlying cash flow was still impacted by a significant cash outflow at Leighton Asia, which is expected to improve in 2022. The factoring balance was reduced to AUD 454 [ph] million at the end of 2021 compared with AUD 976 million in December 2020.

CIMIC ended the year with a net debt level of AUD 498 million with the variation during 2021, including the unwinding of AUD 542 million of factoring and AUD 318 million of dividend payments. CIMIC continues to have solid investment grade rating from Moody's and S&P.

New work of AUD 20.4 billion was secured during 2021 and is already well above pre-COVID-19 levels. The period-end order book stands at AUD 33.2 billion, a 10% increase year-on-year.

The pipeline of relevant tenders to be bid and/or awarded for 2022 and beyond is approximately AUD 480 billion, including AUD 115 billion of PPP opportunities. CIMIC has announced NPAT guidance for 2022 of AUD 425 million to AUD 460 million subject to market conditions.

Then a look at Europe. In 2021, sales were 3% higher at €1.3 billion.

Operational PBT stood at €60 million. At the nominal level, a loss was recorded of €150 million due to the one-off extraordinary impact of the €195 million Chilean project arbitration decision.

Net cash from operating activities of €94 million reflects a strong cash conversion in the core business. And at the end of December 2021, the division's balance sheet maintained a solid net cash position of €799 million.

New orders in the period of €1.9 billion were broadly stable year-on-year and equivalent to 1.1 times work done. The divisional order backlog ended December 2021 at €4.6 billion an increase year-on-year of 6%.

For 2022, we expect operational PBT for Europe of €45 million to €65 million. Now let's summarize the performance of Abertis, which shows a strong improvement.

Abertis average daily traffic in 2021 was 21% higher year-on-year reflecting the easing of mobility restrictions introduced last year due to the COVID pandemic and benefiting from the resilience supported by the group's diversified portfolio of toll roads. During the second half of the year traffic levels were consistently above those of 2019.

Operating revenues rose 20% to €4.9 billion with EBITDA 28% higher year-on-year at €3.35 billion. The 2021 figures include the full consolidation of the RCO Concession Company in Mexico and the Elizabeth River Concession in the US acquired during 2020 as well as the impact of the expiry of the Spanish concessions AP-7 and Invicat.

Net profit in 2021 pre-PPA was €691 million an 89% increase year-on-year. Abertis profit contribution to HOCHTIEF after PPA amounts to €58 million in 2021 with a continued strong recovery in earnings in Q4.

The toll road company made a dividend payment of €601 million in April 2021 of which HOCHTIEF received its share of €119 million. The proposed dividend for 2022 is €600 million.

Abertis announced in October 2021 that it has signed an agreement with the Chilean Ministry of Public Works for the development of major CapEx project more than €300 million. As part of this agreement the Chilean Autopista Central concession period will be extended.

Looking forward, we expect our Abertis investments will continue to make a positive profit contribution to HOCHTIEF in 2022. Turning back to the group overall.

I wanted to underline how in 2021 HOCHTIEF accelerated its focus on ESG priorities environmental, social and governance priorities. As I highlighted to you previously HOCHTIEF fully supports the goals of the Paris climate agreement to stop global warming and to achieve climate neutrality by 2050.

Ambition is for the group to reach this objective well ahead of schedule. And I am pleased to report that our Sustainability Plan 2025 has recently been launched.

The plan contains over 60 ES&G commitments including a target to be primary neutral in 2045. The Executive Board which now includes the position of a dedicated Chief Sustainability Officer is leading our twin transition green and digital with the help of our technology and innovation hub Nexplore.

This is a key element of our strategy. And MSCI has recently confirmed our strong AA ESG rating and Sustainalytics ranks HOCHTIEF in the Top 10% for ESG in our industry.

Now let's consider the group outlook. HOCHTIEF's business performance and outlook is steadily improving following the varied impacts of the pandemic across our group over the last two years.

Solid margins, positive cash flow trends and expanding order book driven by the strong increase in new orders during 2021 in our core markets, the group is very well positioned for the future. The risk of our order book is evolving in a positive manner as the nature and the structure of our project contracts steadily moved towards more collaborative models.

And we are seeing strong new orders growth and have positive long-term prospects based on our significant pipeline of opportunities and a stimulus packages in our core markets. Our guidance for 2022 is for an operational net profit in the range of €475 million to €520 million, an increase of between 5% and 15% year-on-year.

The proposed 2021 dividend of €1.91 per share represents a 65% payout on our nominal net profit figure. Since 2012, HOCHTIEF has distributed €2.1 billion in dividends to its shareholders, equivalent to €29 per share.

Looking forward, shareholder remuneration continues to be a management priority. As I have commented on previous occasions, we actively evaluate our -- all our capital allocation opportunities with a view to creating sustainable long-term value for all our stakeholders.

With this objective in mind, we have today announced our intention to make an unconditional and final of market recover offer to acquire the remaining approx 21% of minorities at HOCHTIEF. Key highlights of the offers, at AUD 22 per share, the offer which is made by our wholly-owned subsidiary HOCHTIEF Australia, is well up to €490 million -- sorry, €140 million and is aimed at approx 66.7 million shares of CIMIC which HOCHTIEF does not already own, €140 million, repeat.

HOCHTIEF Australia's intention is to have CIMIC delisted. We intend to ensure that CIMIC maintains and strengthens its leading position in the markets in which it operates and can access opportunities both domestically and internationally.

We will focus on how best to collaborate with CIMIC so that the skills and expertise of both companies are available for the benefit of both HOCHTIEF and CIMIC. And we are committed to expanding the collaboration with HOCHTIEF Group to develop CIMIC's existing strategies in the areas of digitalization, innovation and ESG.

We will keep you informed on the progress of this offer, which depending on the outcome, would result in a significant simplification of the HOCHTIEF Group structure. So thank you very much then to everyone for listening.

And now I welcome your questions.

We're ready for questions, operator. Thanks.

Hey. Yes.

Good afternoon, gentlemen, faster than I would have thought. Just on the dividend, the payout ratio is the same 65% you say.

But it is quite a difference from what was expected. You didn't pay above the payout ratio in this year, i.e., to maintain the levels closer to the absolute levels last year.

Maybe give us some views on that why you decided to not increase the payout ratio, i.e., considering this as an exceptional year, given all the one-offs? And then, secondly, with regard to the buyout of minorities in CIMIC.

And maybe give us the rationale and also where the historical book value of the existing 20 -- sorry, 79% or 78.6% is?

Tobias, hi. It’s Mike Pinkney.

Thanks for your questions. Let me take that first one, in terms of -- regarding the dividend.

As we've said before and as Marcelino commented there, capital allocation is a strategic priority for us. In addition to the dividend proposal that we've announced today, we've also obviously announced our intention to make a significant offer for minorities of CIMIC to the benefit of all shareholders concerned.

And we've said that the strategy is always driven by the objective of creating sustainable long-term value for all our shareholders and indeed stakeholders. So we have to find an equilibrium, we have to balance all these things.

And this is the conclusion that we've arrived at.

Tobias, in regards of the rationale, you know the Australia market is a really very exciting market and it's a market that is having a lot of investors coming in the next years, including the next 10 years. And then for us been very familiar with the market, we thought that was the moment I said to go to for a simplification of our structure which is very good to us.

It's streamlining the company and making it easier. And then, obviously taking all the advantages possible from the market, from the relationship between the two companies, from I would say, saving leakages of dividends et cetera a lot of things that they are contributing clearly to this transaction.

And we thought that right now it was the right moment to do it. We are in the process of looking at the future with this future strategy.

And this simplification to us was essential like we said, that based on all these kind of things that I was telling you, we thought that was the right moment to do it.

Congratulations on this decision. If I may follow-up the book value of the existing holding where does that sit at this point in time?

And also, if I may just ask on the listing costs, how much will that remove for you as a business?

Tobias, yeah, on the book is significantly below the offer price that we've announced today, we'll get back to you with the exact figure.

So the listing costs as you know, they say well the first thing that we need is to wait for the result of this. You know that there are different possibilities.

We have announced the offer. The offer will start physically in I think around the 9th of March something like that when we will give the -- to the CIMIC shareholders all the documentation they be the statement for them to analyze.

And then, we will have one month open period for them let's say, to attend or not to the offer. And then later on, we will know the result.

There are different possibilities as you are aware, if you had a chance to read the summary of our announcement [indiscernible] announcement. And then, let's wait and see and let's evaluate carefully later exactly, how the company is benefiting for this kind of simplification.

Thank you very much.

Hi there. Can you hear me?

Hello.

Hello, Nicolas can you hear me?

Yeah, perfect.

Okay. Go ahead please.

Thanks so much for the talk. I was just wondering, if you could give a bit more outlook on the kind of North American construction landscape moving forward, I suppose just high-level?

Thank you.

Eric?

Yeah. Nicolas, let me give you a little bit more color perhaps.

I mean, basically, Marcelino was indicating there a few minutes ago that the expectation is for growth in general in the nonresidential market. But as you know, our company Turner which is 100% owned is a leader in several of these segments including for example health care.

The -- it's the number one green builder in the U.S. and has held that position now for several years.

Education has also been an important -- is a key segment. But there's also other areas with a lot of growth such as data centers, yeah, data centers now account for nearly 20% of our Americas order book.

So there's a lot of opportunities there. And the Turner is very well positioned because they've got a very strong client base of technology companies.

So in all those areas in addition to other opportunities that they have the outlook seems very positive...

Perfect. Thank you.

Thank you very much.

Hello. Hi.

Thank you for the presentation. I just wanted to ask about, how the transaction will be funded.

And also from your conversation with S&P is there going to be any impact on your BBB- rating? Thank you.

Okay. Thanks for your question Christina.

I mean, obviously we've got to wait to see what the outcome of the offer that we've presented today actually is in terms of what the final financing requirements are. At this stage the offer price is fully covered by a transaction facility with a consortium of banks.

And once we've got the outcome of the offer, we'll look at all the options in relation to the long-term financing. And we'll look at all the options basically.

Our expectation we don't expect it to have an impact on our credit rating of BBB-.

We save all the options, We refer to the options that are very well known for instance debt, hybrid, asset sales, equity, et cetera, all the options that we can say manage. And then we will see depending on the final result, what is the option that is more convenient and efficient to us.

Sure. Thank you.

Just one more. Is there going to be any changes of CIMICs reporting?

I mean at the moment there's no changes in...

You mean you are just in the day D plus 1, meaning that let's go step-by-step. Let's follow the offer.

Let's see finally we can delist the company. And obviously, the information will flow in the way that it's more convenient for the market.

Got you. Thank you.

Hi, Marcelino and Mike and team. Only two questions in my side if I may.

The first one is to confirm that in the cash flows of this year you didn't book any cash outflow from the one-off in Chile. This is the first one.

And the second is that on the guidance that you provide you are – this guidance is based on the current perimeter. This is not taking any assumption on the potential bid so I need to confirm?

Hi, Victor, hi, it’s Mike again. You're absolutely right.

There's no cash outflow in relation to Chile in the 2021 numbers.

And Victor according your second question in regards to the guidance of course, we need to wait until we know what is the final outcome. And the guidance is not taking into account any outcome coming from this offer.

Okay. Thank you so much, Marcelino, Mike.

Thanks, Victor

Hello. Thank you for taking my questions – my question.

Only one question for me. Looking at Europe, it seems like the Europe operational profit before tax guidance is rather on the low side.

But looking at the order book, it grew 6% this year. So could you give us some indication as to why the guidance is on that low side?

Thank you.

Hi, Augustin. Yes.

So obviously, Europe comprises our construction activities complemented by the PPP businesses as well as real estate developments that we've largely wound down now over the last few years. The expectation is for a stable operational PBT margin.

And we're extremely focused on a very disciplined approach to bid in for new project. The Europe business has been reduced in size to right size it, so that it is competitive, profitable.

And what I would highlight is that as you've seen in the numbers the 2021 cash flow performance was extremely strong, yes. And we're focusing above all on the cash generation...

Perfect. Thank you very much.

Okay, operator. I think if we've not got any more questions, we can finish the meeting.

Okay. Thanks everyone.

Yes. Thank you everyone for attending to this conference call.

And then I hope that we can see and to continue speaking about the things in day to day with the team and in the next occasion when we present our quarterly report. Okay.

Thank you. Thank you very much.