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ACS: HOCHTIEF’S 1Q’20 RESULTS CAME IN ABOVE EXPECTATIONS (ANÁLISIS BANCO SABADELL)

Hochtief (50.4% ACS; 63% of ACS’s EBITDA; 23% of ACS’s T.P. ex-Abertis) has just released good 1Q’20 Results (with the exception of Abertis), in general above expectations. Sales grew +7% (vs. -2% BS(e); +8% adjusted for FX), while EBITDA fell -2% (vs. -6% BS(e)), with the margin sliding -60bps to 7.1%, hit by the expected drop in Abertis’ contribution (€ 1 M vs. € 21 M in 1Q’19; € 4 M BS(e)), explained by the mobility restrictions mainly imposed by Spain, France, Chile and Italy, which had a significant impact on traffic in the last month of the 1Q’20 (-11% vs. 1Q’19). Excluding the impact on Abertis, EBITDA would have grown by +3%, with a better margin in all the divisions.
The Operational Net Profit slid -7% vs. 1Q’19 (vs. -4% BS(e); between +3% and +9% guidance’20 adjusted for BICC), although excluding the impact from Abertis, it would have risen by +10%. The order backlog came in at around € 47.6 Bn (-3% vs. 1Q’19 and +1% adjusted for FX) with an order intake level -2% lower (-3% adjusted for FX; 1x BtB) as a result of the fall registered by CIMIC (73% Hochtief) in its earnings release last Monday (-40%, which we blame on the Covid-19 crisis) and despite the good performance of awards in Europe (+20%) and Americas (+8%)s, where the impact from Covid-19 would not be significant yet.
As for cash generation, cash flow from operations adjusted for factoring (that falls by around € 300 M vs. 1Q’19) improved by € 160 M vs. that seen in 1Q’19, totalling € -179 M hit by the seasonality of working capital on the quarter, which in any event improves by € -133 M vs. 1Q’19 (adjusted for factoring). However, as we saw in CIMIC’s earnings release, cash is severely hit on the quarter by payments linked to BICC (that we foresee through the year), which totalled € -850 M and € -122 M in share buy back by CIMIC and Hochtief itself, and thus, the NFD stands at €134 M vs. € 1.529 Bn of net cash in Dec’19 (€ 1.173 Bn of net cash in 1Q’19). The company stresses its liquidity position of around € 6 Bn in cash and equivalents vs. € 219 M of debt maturities in 2020 and € 1.022 Bn in 2021.
The company announced that once it sees higher visibility on the impact from the Covid-19 crisis on its business it will update its 2020 guidance, if necessary (between € 690 M and € 730 M currently / between +3.1% and+9.1% vs. 2019).
Positive news for ACS, as these results are not significantly hit by the Covid-19 crisis (with the exception of Abertis) and are above expectations in both EBITDA and working capital. Although these results should not come as a big surprise for the market (following CIMIC’s release made yesterday), we expect a good reaction in ACS (in the absence of the release of the rest of divisions on 14/05). ACS has shed -4% vs. IBEX YTD, and climbed +13% (vs IBEX) from February’s IBEX highs (when the impact from Covid-19 on stock markets started). The share price has rallied +109% from the lows hit on 19/03, +104% vs. Ibex 35.