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ACS: FY2020 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'20 vs. 4Q'19 Results:
Sales: € 7.733 Bn (-24.5% vs. -16.7% BS(e) and -8.8% consensus);
EBITDA: € 403.0 M (-45.7% vs. -23.0% BS(e) and -29.0% consensus);
Net Profit: € 97.0 M (-49.7% vs. -51.8% BS(e) and -52.8% consensus);
FY2020 vs. FY2019 Results:
Sales: € 34.937 Bn (-10.5% vs. -8.5% BS(e) and -6.4% consensus);
EBITDA: € 2.397 Bn (-23.9% vs. -18.5% BS(e) and -19.9% consensus);
Net Profit: € 574.0 M (-40.3% vs. -40.7% BS(e) and -41.0% consensus);

At yesterday’s closing bell the company released FY2020 results that were hit by Covid-19 and by a series of adjustments stemming from M&A moves (and other one-offs that raised reported EBITDA by +5%). Operating EBITDA (underlying) was +3% above our estimate (+5% consensus if we apply the same adjustments; in line comparing operating EBITDA directly) and better than expected in working capital levels (in line with FY2019, adjusted for factoring, while we expected to see deterioration vs. 2019). The comparison below is of reported (not operating) results.
Operating sales came in +2% above our estimate and in line with the consensus, with a -6% drop vs. 2019. Operating EBITDA reached € 2.52 Bn (-20% vs. 2019; -22% BS(e) and -23% consensus adjusted), a drop that would have been -10% excluding the negative impact from Abertis (already known, due to the falling traffic figures; € -43 M vs. € 306 M in 2019). The operating EBITDA margin (ex-Abertis) would have fallen only -30bps vs. 2019 as a result of the shrinking margins in the Services business (expected) and despite the improvement in Industrial Services (+70bps). Net Profit totaled € 574 M (-40% vs. 2019), in line with our estimate and that of the consensus, and hit by a series of non-operating factors, both positive (capital gains from the sale of Thiess, provision recovery and derivatives on ACS shares) and negative (Gorgon projects and cancellation of the goodwill and PPAs linked to the Thiess sale), which practically offset each other.
The operating cash flow (before working capital and CAPEX) came in -27% below 2019 levels although in line with our estimate, whereas working capital fared better than expected (€ -220 M adjusted for factoring, in line with 2019 vs. € -250 worse as of 9M’20; € -660 M BS(e)). On another note, the free cash flow was hit by payments linked with BICC (€ -844 M already known) and benefited from the cash received from the sale of 50% of Thiess (€ 1.342 Bn) and the sale of photovoltaic plants to Galp (€ 336 M), among other factors. Thus, NFD (ex IFRS16 and factoring) totalled € 1.82 Bn (vs. around € 2 Bn BS(e) and € 1.885 Bn consensus /€ 1.236 Bn as of 9M’19/ NFD/operating EB ITDA 0.7x/1.3x including factoring) that rose by € 1.18 Bn due to the share buyback in ACS, Hochtief and CIMIC.
The order backlog falls by -11% vs. 2019, and adjusted for FX and the sale of 50% of Thiess, it only drops by -3.7%. The company did not give any order intake figures (hit by the sale of Thiess and the acquisition of Broadspectrum), although it outlined that in the US the backlog rose by +3% in local currency (39% of the backlog) and +7% in Spain (12% of the backlog), while it fell by -8.5% in Australia (26% of the backlog, already known).
In our view, the results show the resilience of ACS’s business, which has seen a moderate impact from the Covid-19 crisis (except in Abertis, Cimic and Services). As the results were slightly above expectations in operating EBITDA and better in cash generation (in terms of working capital), we would expect a positive share price reaction (although the comparison vs. the consensus is not evident). The stock has underperformed the IBEX by -8% thus far this year. There will be a conference call at 12:30 (CET). BUY. T.P. € 29.19/sh. (upside +13.58%).