May 19, 2020 (Thomson StreetEvents) — Edited Transcript of Strabag SE earnings conference call or presentation Wednesday, April 29, 2020 at 1:00:00pm GMTThank you very much for the introduction. Ladies and gentlemen, thank you very much for your interest in STRABAG. We are talking about the fiscal year 2019 results, although I understand that a lot of you do have many, many questions also regarding the current situation of the company.But now let’s start with the presentation concerning 2019. I trust that the charts, which we have inserted are in front of you, and I would like to start with Chart #3.STRABAG again had a very successful past financial year and new record results for all important key figures clearly underpin that. Our group generated a record output volume for the third year in a row in 2019. Also the order backlog as at December 31, 2019, grew by 3% year-on-year to EUR 17.4 billion, also reaching a record level. The EBITDA earnings before interest and taxes, which is the most important financial indicator for us, stood at almost EUR 603 million, thus surpassing its previous peak, not only in absolute terms but also relative to revenue. With an EBIT margin of 3.8%, we have come a big step closer to our midterm target of 4.0% by 2022.Although the new record year justifies a far higher dividend, the unforeseeable midterm impact of the coronavirus pandemic has prompted the Management Board and the Supervisory Board to propose to the Annual General Meeting on 19th June, 2020, a conditional dividend of EUR 0.90 per share. This is to ensure that the dividend payment does not unduly burden our company’s liquidity. Entitlement to and payment of the dividend is subject to the condition that the total amount of liquid assets of the company and of all companies fully consolidated plus any contractually agreed but unused loans does not fall below EUR 1 billion as at 31st October, 2020, even if the dividend is paid out.In accordance with IFRS and IAS, liquid assets include securities, cash in hand and bank deposits.By 25th November 2020, we will obtain confirmation from KPMG of the total amount of liquid assets plus contractually agreed but unused loans as of 31st October, 2020. Then we will state whether the above condition has been met. If the condition precedent is met, the dividend payout date will be 30th November, 2020, and the ex-dividend date will be the 26th November, 2020. The payout ratio thus comes to 25%, which is admittedly below the range of 30% to 50% of net income after the minorities as defined by our long-term dividend policy. The dividend yield, however, is 3.0% based on the average share price for 2019.Let’s now come to some key figures given on Chart #4. STRABAG SE generated a record output for the third year in a row in 2019. It was a plus of 2%, and the output came to EUR 16.6 billion. And thus, we exceeded our own forecast. Business was characterized in particularly by growth in the home market of Austria and in transportation infrastructures in Poland, Hungary and the Czech Republic, which more than compensated for the decline caused by the loss of a key client in property facility services in Germany in the middle of the year. Performance in the remaining markets was mixed.On Slide #5, we give — look on the significant increase in order backlog. Our order backlog as at the year-end 2019 grew by 3% year-on-year to reach another record level of EUR 17.4 billion. We saw declines in Hungary, Austria and Poland. For example, there, we — work progressed on numerous major projects in these countries. This development was contrasted by the substantial expansion of an existing order in the United Kingdom and a significant increase in the order backlog in Germany and in the Czech Republic.The projects acquired in 2019 include (inaudible), the construction of a section of the D35 motorway and the modernization of several railway lines in Czech Republic, the upgrading of bridges on the A9 motorway in south of Germany, 2 mining contracts in Chile, the renovation of the southern section of Budapest’s M3 metro line in Hungary, as well as the construction of a wastewater pumping station in Qatar, a pump storage power plant in Dubai and a pumping station for a wastewater treatment plant in Toronto, Canada.Let’s have a look on our EBITDA, which is given on Slide #6. Our EBITDA increased by 17% to EUR 1.1 billion, topping the EUR 1 billion mark for the first time. The EBITDA margin grew from 6.3% to 7.1%. What must be taken into account here, however, is that the first-time application of IFRS 16 Leases means that rental expenses recognized in EBITDA in previous years are now shown as depreciation and interest. Without the application of IFRS 16 Lease, the EBITDA would have been EUR 62 million lower, which means a plus of 10% year-on-year.The depreciation and amortization expense grew by 29%. One of the reasons for this development is, again, the first-time application of IFRS 16 Leases, according to which right-of-use assets from leases are to be measured less depreciation and the corresponding lease expenses can no longer be recognized under the item other operating expenses. Our EBIT, given at the lower part of the chart, increased by 8% and amounted to EUR 603 million, which corresponds to an EBIT margin of 3.8% after 3.7% in 2018. Adjusted for the previous year’s nonoperating step-up profit, the EBIT grew by 20%. The improvement is attributable to the North and West segment where the earnings nearly doubled.Let’s have a look on Chart #7, giving the earnings per share. At minus EUR 25 million, the net interest income was comparable in 2019 to that of the previous year. Although a negative exchange rate result of minus EUR 6 million was achieved with regard to the exchange rate differences, the interest expense was reduced as well due to the repayment of a bond in the previous year.Our income tax rate stood at 34.4%, slightly higher than the previous year, where it had amounted to 31.7%. The earnings owed to minority shareholders amounted to almost EUR 7 million after a little bit more than EUR 9 million in the previous year.Our net income after minorities stood, as given on the chart, at EUR 371.7 million, an increase of 5%. The earnings per share amounted to EUR 3.62 after EUR 3.45 in 2018.Let’s come to our cash figures given on Chart #8. The total assets and liabilities of our balance sheet increased to EUR 12.3 billion compared to EUR 11.6 billion on December 31, 2018, which is a plus of 6%. It was in part due to the first-time application of IFRS 16 Leases. This also explains the increase in property, plant and equipment and financial liabilities. Despite this increase of 6% of the balance sheet total, our equity ratio remained nearly unchanged at 31.5%. 2018, it had been 31.6%.As usual, in the meantime, our net cash position was reported on 31st December, 2019. This figure fell slightly in the face of the marginally higher financial liabilities from EUR 1.2 billion to EUR 1.1 billion. Reassuring factors also for the Ratings agency Standard and Poor’s. In September 2019, S&P again confirmed our investment-grade rating BBB. The outlook was left at stable. S&P sees STRABAG SE’s strength and opportunities above all in the stable margins in an otherwise quite cyclical market environment, the strategic access to construction materials, our strong market positions and the high reputation in the credit markets.We now come to our cash situation given on Slide #9. Our cash flow from operating activities improved from EUR 789 million to EUR 1.1 billion as a result of a higher cash flow from earnings and a further — even higher reduction of the working capital. The expectation of a significant reduction in advance payments in 2019 and a concomitant increase in working capital to familiar levels thus did not materialize. The cash flow from investing activities was less negative largely due to the smaller changes in the scope of consolidation. The previous year’s figure had included the cash outflow from our PANSUEVIA transaction. The cash flow from financing activities stood at minus EUR 412 million after minus EUR 534 million in the previous year. This decrease is due to the lower volume of a bond repayment and the fact that 2018 figure had been affected by a cash outflow related to the acquisition of the minority shares of the now delisted German subsidiary, STRABAG AG, in Cologne.We come to Slide #10. As this chart shows, the high cash inflows are always registered in the second half of the year. The second half of 2017 was a record, and we expected that the high working capital inflows would reverse in 2018 or at least in 2019. The expectation of a significant reduction in advance payments and a concomitant increase in working capital, thus, has not yet materialized.Let’s come to Slide #11. After an exceptionally high free cash flow in 2017, we have been able to post a positive free cash flow in 2018 and in 2019, again. We had forecasted net capital expenditures, cash flow from investing activities in the amount of no more than EUR 550 million for the 2019 financial year. In the end, they totaled to EUR 593 million. The CapEx, the gross investments before subtraction of proceeds from asset disposals stood at EUR 688 million. This figure includes expenditures on intangible assets and on property, plant and equipment, not including the noncash additions of right-of-use assets of EUR 647 million, the purchase of financial assets in the amount of EUR 31 million and EUR 9 million from changes to the scope of consolidation. Most of our maintenance investments were made in the core markets of Germany, Poland and Austria.Capital investments, which this time’s exceeded the maintenance investments, were impacted above all by the large tunnel construction orders. For example, equipment was increasingly required in the mining business in Chile.In addition, we pushed ahead with the expansion of our network of asphalt and concrete mixing plants, especially in Croatia, Austria and in Romania. Expenditures on intangible assets and on property, plant and equipment during 2019 must be seen against the depreciation and amortization expense in the amount of EUR 511 million. The goodwill impairment of only EUR 2 million is almost unchanged from the previous year.We now come to our 3 operational segments. Let’s start with the biggest one, which is North and West given on Slide #12. I would leave out the respective segment outlook this time because I will come back to the group-wide outlook instead later on.The North and West segment executes construction services of nearly any kind and size with a focus on Germany, Poland, the Benelux countries and Scandinavia. This segment posted a 4% higher output volume of EUR 8.1 billion in 2019. This is due to the 2 largest countries in the segment, Germany and Poland, while the other markets such as Benelux, Sweden and Denmark showed small mixed deviations. The EBIT of the segment nearly doubled to EUR 310 million, thanks to strong growth in the German infrastructure business and a lower number of new loss-making projects in building construction and civil engineering compared to the previous year, and despite the strong cost inflation we’ve seen in Poland. The EBIT margin hence increased from 2.2% in 2018 to 4.1% in 2019.The order backlog of North and West as at 31st December, 2019, was at the unchanged high level of EUR 8.8 billion. Declines in Sweden, Poland and Benelux caused by the working off of large orders could be fully compensated by the increase in Germany.We now come on Slide #13 to our second biggest operational segment, which is South and East. The geographic focus of this segment is on Austria, our home country; the Czech Republic; Slovakia; Hungary; Southeast Europe; Russia and Switzerland. The environmental technology activities are also handled within the segment. The output volume in South and East was up by 6% to EUR 4.9 billion in 2019. Increases were recorded mainly in Austria, Hungary, the Czech Republic and also Serbia, while a decline was recorded in Slovakia, for example. Due to provisions and lower earnings in smaller markets on the other hand, the EBIT fell by 14% to EUR 122 million, and the EBIT margin slipped from 3.1% in 2018 to 2.5% in 2019.Thanks to several large orders in the second half of the year, the order backlog grew to EUR 4.5 billion, a plus of 4% compared to the end of 2018. On the one hand, this figure fell back in 2 markets as expected. In Hungary, resources are currently being used primarily to work off the high order backlog. At the same time, however, another large scale project, the renovation of the southern section of the M3 Metro line in Budapest was added to our books in 2019.And in Slovakia, bid evaluations on the client side are regularly delayed, sometimes for several years. On the other hand, these developments were compensated, among other things, by several modernization orders from the railways in the Czech Republic.We now have a look at our third and last operational segment, which is International and Special Divisions. The key figures are given on Chart #14. This segment includes, on the one hand, the field of tunneling. The concession business, on the other hand, represents a further important area of business with global project development activities in transportation infrastructures, in particular. Regardless of where the services are rendered, the Construction Materials business, including our group’s dense network of production plants, but with the exception of asphalt also belongs to this segment. The Real Estate business, which includes the property — which stretches from project development and planning to construction and operation and also includes the property and facility services businesses completes the wide range of services in this segment.Additionally, most of the services in non-European markets are also bundled in International and Special Divisions. The segment generated an output volume of EUR 3.5 billion in 2019. This corresponds to an already expected 8% decline resulting from the cancellation of a major profit and facility services order in the middle of the year.Starting from a high level, the EBIT of the segment dropped slightly to EUR 184 million. In 2018, it amounted to EUR 199 million. While the EBIT margin weakened a bit to 5.7%, whilst it was 5.8% the year before. The continued positive environment in real estate development and a capital gain from the sale of a facility management investment in Hungary had a positive impact on the figures. This was contrasted, as I already mentioned, by the loss of the large order in the Profit and Facility Services business in Germany in the middle of 2019. The order backlog, nevertheless, increased by 9% compared to the 31st December, 2018. The numerous new large-scale projects were able to significantly overcompensate for the reduction in order backlog in the home markets of Germany and Austria. The order expansion for the North Yorkshire Polyhalite Project in the U.K. contributed especially to boosting the order backlog.In Chile, the contracts for the Candelaria open pit and underground mine were extended, and the group received 2 new long-term contracts at El Teniente mine in Rancagua.In Qatar, a wastewater pumping station plant is being designed and built by a group subsidiary. And our tolling specialist, EFKON, expanded its presence on the Norwegian and Indian markets with further projects.I now come to the group’s outlook given on Chart #15. As already indicated in our ad-hoc release last week, we updated our guidance for the year 2020. It is still not possible to make a reliable assessment of the effects of the coronavirus crisis on the current year’s figures. From today’s perspective, the Management Board anticipates a 10% reduction in output volume compared to the previous outlook of more than EUR 16 billion. It can be furthermore assumed that in line with the projected decrease in output volume, the EBIT should also come at a somewhat lower level. We believe that an EBIT margin of at least 3.5% can be reached. We base our forecast on the fact that the coronavirus pandemic affects us as an international company in different markets in very different ways. This could also make it more manageable. In one country, there are steps back to normality, while we are still in crisis mode in other countries. Our geographical diversification helps us here a lot. If it was the same situation everywhere, the challenges would be even greater than they already are.Currently, the effects of the crisis are still manageable. But many industries, such as tourism, stationery trade, et cetera, are heavily affected. Many real estate investments had been planned there. This is why it is our turn now as the Management to evaluate the midterm effects of the crisis. As an example, on the one hand, we must pay close attention to the payment behavior of clients and our own productivity. For instance, the availability of subcontractors or personnel. On the other hand, declines in demand from the private sector could be offset to a certain extent by public economic stimuli.So for — regarding the group outlook, I thank you for your attention, and I’m now open to answer your questions. Many thanks for your attention.================================================================================Questions and Answers——————————————————————————–Operator [1]——————————————————————————–(Operator Instructions) The first question comes from the line of Markus Remis of RCB.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [2]——————————————————————————–A couple of questions from my side. I would prefer to take them one by one. First, starting with 2019, the performance in North and West segment was quite strong. I read that there is a EUR 20 million provision release from the Netherlands, but still margin is much better than I would have expected. So is it fair to assume that 2019 should be a good proxy of the underlying profitability going forward, so meaning that quality of the order book is comparably good and that loss-making projects will not reoccur or basically done? Is that a fair assumption?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [3]——————————————————————————–Thank you, Mr. Remis, for the question. I think the very good — admittedly very good situation in 2019 in North and West was heavily driven by the excellent use of resources, especially in the German infrastructure business. And it turned out that this business can produce excellent results given the rather manageable risk profile of small and midsized contracts. But also in the private business, the operation was quite successful in 2019. But, especially regarding the private business, it is, of course, difficult to predict the nearer future, which means especially 2021 and so on because we don’t know the behavior of this customer circle in the future. With regards to infrastructure contracts, I would say, yes, it is a good basis for the future.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [4]——————————————————————————–Okay. Very clear. And then a clarification on South and East. I saw that you did a lot of provisioning. And I think — or am I wrong assuming that in South and East, you’ve also digested provisions for the cartel allegations in Austria?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [5]——————————————————————————–You’re not wrong. You’re not wrong with that assumption.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [6]——————————————————————————–Okay. Very clear. And then regarding the current situation in Austria. I think you recently indicated that construction sites are gradually being resumed. What’s the status quo? How much of the — how should I say, how much of the construction sites are back to normal? And is kind of the availability of stuff any issue?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [7]——————————————————————————–There, I can give positive news because I could simplify my statement to the extent that basically each and all construction sites are back to normal in Austria. I don’t know any significant construction site, which was still blocked. And fortunately enough, the same goes for personnel resources. Our cautious expectations regarding the availability, for instance, of foreign personnel of commuters, were too cautious. And we — today, we can state that personnel — the staffing situation is more again back to normal also.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [8]——————————————————————————–Okay. Because my feeling is that the EUR 14.4 billion output guidance is a bit conservative bearing in mind that the major markets have been pretty unaffected by any construction ban. And also, it has been rather short-lived. Of course, I think the output that has been missed so far is unlikely to be caught up in the course of the year. But still, to me, it seems that you have maybe built in a safety buffer for I don’t know, weakening of the environment?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [9]——————————————————————————–Yes, it is true, of course, [the choices] we had to make cautious assumptions. With regard to Austria, we lost more or less 1 month, which means the second half of March and the first half of April because we had the shutdown and then we had to reopen the sites and that took some time. So a rule of thumb is that we lost more or less 1 month in Austria. This was not the case in major other markets, except of Belgium, where we had a rather similar situation, lasting even longer than in Austria and Luxembourg, Serbia, Kosovo, which are not really important markets to us. But of course, we have to take into consideration that there might be losses in productivity in other markets where we have not seen shutdown. And hence, it was an overall assumption that 10% could be a guess. But it is — that has to be admitted, it is not a highly qualified guess.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [10]——————————————————————————–All right. Okay. And you already gave me a key about productivity that intensified safety measures and stricter hygiene standards. To which extent is that hampering the progress on the construction side? Is that of any meaningful impact?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [11]——————————————————————————–Actually, it works better than we expected because it is a rather clever escalation mechanism that means that protective measures are in various — are depending on various degrees on closeness of the workers. And that helps a lot in Austria to have a rather reasonable productivity. For instance, the weakest step is that our workers, our blue-collar workers have to wear so-called loops instead of masks, which is a sort of scarf and that it’s good enough for works under open sky where they come not closer than one meter. And that, of course, is not a real problem. And hence, it works better than initially expected.——————————————————————————–Operator [12]——————————————————————————–The next question is from Christian Korth of HSBC.——————————————————————————–Christian Korth, HSBC, Research Division – Analyst [13]——————————————————————————–I would like to ask a little bit more detail about [the outlook]. So firstly, I’m pleasantly surprised that you are able to give an outlook because many other companies currently do not seem to have a lot of visibility. So I just wanted to ask what gives you confidence in your outlook, although I heard your comment just a few minutes ago. What gives you confidence in your outlook? And also in the fact that you said the significant short-term effects are behind you. The second question is a little bit about this as well because you are writing that the significant short-term effects are behind you and now you’re looking towards the midterm effects. So is there also anything in between this, like short-term effects that are maybe not significant, but still are affecting you? Or is that negligible?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [14]——————————————————————————–Thank you, Mr. Korth. Well, the one factor which makes us believe that we have a certain grasp on the current year is, of course, our intact order backlog. We are in the privileged situation as a construction company that we have a rather big order backlog, which is far bigger than 1 year volume of output. And it is intact, which means we don’t see any major contract cancellations of running contracts. Of course, a slight majority of our contracts is stemming from public employers, and from that side, we also see newly incoming contracts. But of course, thanks to that rather big order backlog, we have a rather good visibility, at least for the rest of the year. Because a majority of contracts to be worked off in the rest of the year is already in our backlog. And given the experience that a construction site, which has begun is also to be finished, also in the interest of the employer.That gives us the trust that we more or less have an idea of the top line of our complete year’s performance. And with regard to the bottom line, in the meantime, as I pointed out before, we have a feeling regarding frictions in supply chains or in staffing sites and those frictions turn out to be manageable. And hence, we dare to make the guidance or the update of the guidance, which we finally published. When it comes to midterm effects, it goes without saying that our order backlog is a big one, but it doesn’t last forever. And if we have a look at 2021, we are talking about many contracts, which we do not yet have in our books. And that, of course, heavily adds to the uncertainty of the future for STRABAG. And hence, that’s what I always underpin. We have to stay very, very vigilant with regards to our client’s behavior and also with regard to our productivity. And from today’s point of view, I would not dare to make already a guess or a guidance for 2021 for these reasons.——————————————————————————–Christian Korth, HSBC, Research Division – Analyst [15]——————————————————————————–That is very understandable. Thank you very much for this. One last one, please. On the dividend proposal that you announced last week, in that there was a passage that — where you said that basically there is an opportunity that you will be revisiting the stance towards November. Can you explain in a little bit more detail how the process will take place? So will you run reporting on the basis of 30th of October that will then be analyzed by KPMG, and that’s the basis for your decision? Or how can I think about this?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [16]——————————————————————————–No, I don’t think there is any room for decision for us left. It is a very clear digital solution, which we have proposed. And that means that KPMG will come in. We will open our books with regard to the liquidity situation, and they’ll check the accounts and then the amount of available liquidity, including unused credit lines, is either above or less EUR 1 billion, if it — including the amount which we have to pay out as a dividend. And if it is less than EUR 1 billion we don’t have any decision left. Then it will not be paid out because we expect our annual general meeting to take that final decision. But if it’s more than EUR 1 billion, again, it would not be a decision of the Management Board, and it would be paid out according to the AGM decision. So a very simple digital, either yes or no decision process.——————————————————————————–Operator [17]——————————————————————————–The next question is from Daniel Lion of Erste Group.——————————————————————————–Daniel Lion, Erste Group Bank AG, Research Division – Analyst [18]——————————————————————————–Yes. Good afternoon.——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [19]——————————————————————————–Good afternoon, Mr. Lion. I don’t hear…——————————————————————————–Operator [20]——————————————————————————–Mr. Lion’s line has now dropped. We will go with the next question. The next question is a follow-up from Markus Remis.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [21]——————————————————————————–Me, again. A few left. Firstly, on the working capital, you mentioned that you would have expected a high working capital base in 2019? Is this kind of swing this working higher capital workup — higher net working capital requirement, now something that we will see in 2020. And if so, can you maybe elaborate a bit more on what’s driving that? Is it just the kind of the liability side of the balance sheet?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [22]——————————————————————————–A very difficult question. I could only state that as per today, we do not really see a change in that, especially the payment behavior of our customers is more or less unchanged, which also, of course, plays a huge role with — regarding to our working capital situation. And hence, I wouldn’t see a sharp change right now. And I wouldn’t dare to make a new prediction for the full year because the situation is — in that respect, isn’t really transparent. But so far, we don’t have any indication that the situation would significantly alter.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [23]——————————————————————————–Okay. Then one question relating to the future price discipline. It’s a very acute stage in the kind of — in the middle of the crisis, but are you concerned that after years of plenty of tenders and most contractors having full order books and you like your competitors repeatedly stated that you would be more into cherry picking that it more kind of — or less projects on the table, potentially less projects on the table, the price, quality might come down again?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [24]——————————————————————————–Yes. That is — as a matter of fact, that is one risk, which we see when it turned out that on the private side, the demand would go — would be going down. There are some indications that it’s pretty visible that some potential investors will be more or less reluctant to place new orders now, for instance, large parts of the industry, which invests for their own — for their own needs. For instance, the automotive industry. Of course, they will be reluctant to place new orders in the nearer future. And the same goes for investors who have invested a lot in hotels or shopping malls in the past. And it depends — it all depends on the question whether there are other private investors who would potentially compensate those orders, which will not be placed in the future.And this is an answer, which I cannot give today. The only point which I see is that the fundamental pressure on investors to place surplus liquidity somewhere will remain also after the crisis. So the pressure on investors to find acceptable investments will remain as it was before or it will become even stronger probably. And real estate is an asset class, which is still on the table. And hence, there might be some hope that we will see sort of compensation also on the private side for losses, which are definitely to be expected from certain investors of the past.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [25]——————————————————————————–Okay. Can I follow-up on 2 more balance sheet and P&L questions. Firstly, the drop in the equity result or equity contribution that was quite [gone]. Is that due to one specific project? Or is it a bunch of projects that have gone sour?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [26]——————————————————————————–No, I — that is — yes, there were some in those — in this position. We also have result contributions of joint ventures of ours. And this was to a certain extent due to result — or outstand — or not from negative result contributions from certain joint ventures, which we have.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [27]——————————————————————————–But there apparently was a bunch of consortia. It was apparently a bunch of consortia, which did not deliver because the swing factor year-on-year is more than EUR 100 million?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [28]——————————————————————————–Yes. That’s right, yes.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [29]——————————————————————————–It’s quite significant?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [30]——————————————————————————–Yes, it is true. It was several major joint ventures. But on the other hand, when you have a look at 2018 figure, you have to keep in mind that there we had that step-up of PANSUEVIA of EUR 55.3 million. So if you deduct the EUR 55.3 million from the previous year’s figures, the deviation is not that big anymore.——————————————————————————–Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [31]——————————————————————————–Okay. And my last question would be on the refinancing needs, there’s a EUR 200 million bond to be refinanced this year. In recent years, you’ve basically leaned away from the bond financing. Is that — should we assume this to be true also in the current year? So any other form of refinancing? Or do you still consider bond as an appropriate means?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [32]——————————————————————————–Definitely, a bond is and remains an appropriate means for refinancing. But as long as the liquidity situation is, as it was in 2019, and as it is still today, it would not really make sense to make use of that means.——————————————————————————–Operator [33]——————————————————————————–(Operator Instructions) And the next question comes from Daniel Lion of Erste Group.——————————————————————————–Daniel Lion, Erste Group Bank AG, Research Division – Analyst [34]——————————————————————————–I hope this time it works better. I would have a few more questions. I am going to start with (technical difficulty) processes going forward.——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [35]——————————————————————————–Mr. Lion, I — unfortunately, I can’t clearly hear. Could you repeat what you have said, please?——————————————————————————–Daniel Lion, Erste Group Bank AG, Research Division – Analyst [36]——————————————————————————–Yes, sure, I’ll try to move away a little bit. Maybe the signal is better now. I would like to focus a little bit on the tender processes going forward and potential bottlenecks we might see due to the lockdowns and due to — could you give us an overview of where you might see these bottlenecks, maybe the strongest or maybe countries where you don’t see any at all? And how this is so far shaped during the lockdown or the development of the crisis in the last 1.5 months? Do you have any indication of how this behaves? And yes, in which countries you would expect this really to hit strongest in terms of new tenders?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [37]——————————————————————————–Well, first of all, I would like to make the statement that we see a stronger impact on the private side than on the public side. And in all markets where the private side is especially important the influence would be bigger than in markets where the public side is much more important. For instance, in Hungary and in Poland, for us traditionally, the public side, the infrastructure side is far more important than the private investor side. Whilst in Germany or in Austria, it is more or less an equal relationship and the importance of private investors is relatively bigger. So, first of all, potentially, private investors are more concerned than public ones. It is, however, true that in the — under the current crisis, also on the public side, sorry, the shutdown of offices had an impact because many civil servants officially are in home office, but they are not in a position to work from home because they don’t have the digital means to do that. So there are many decision-makers who are not taking any decisions today.And we have the hope that after a certain normalization of the working conditions, then we’ll be back to work and back to decisions. But this is not because a lack of money or a lack of project. This is just a matter of logistics on the public side. There is one single group of entities on the public side, where we are a little bit worried, and this is municipalities, especially in Germany, but also in Austria because they are heavily burdened by the crisis. And definitely, a lot of municipalities need financial support from the state, either by the provinces, the Bundesländer or by the federal states. And it will be very decisive that the states will support their municipalities, and we should not underestimate the importance of municipalities for infrastructure. Many, many minor roads projects are coming from municipalities. But in general, the overall expectation is that the inflow from public contractors from — sorry, from public employers and customers will be more or less intact also in the future.Whilst on the private side, of course, again, there is many, many investors who have remote working right now. And they are not taking any decisions for the time being. And there, there is a bigger uncertainty, whether at the end of the day, once they’re more or less back to work, as I pointed out before, those who definitely will remain reluctant to place construction orders for the nearer future. Let’s take the automotive industry, will be replaced by others who have to invest some money, and this is the uncertainty, which we have to face in the midterm.——————————————————————————–Daniel Lion, Erste Group Bank AG, Research Division – Analyst [38]——————————————————————————–When you look at this on a country-by-country view, which countries would you expect to be impacted most and which not at all or maybe least?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [39]——————————————————————————–Well, I think there is a certain probability that Germany will be less concerned because we have that stability on the infrastructure side given the midterm (inaudible). This is an investment program where I always stated that this will remain in place whatever might happen in the environment. And that’s my conviction till today. And this is a very huge portion of midsized and major projects on the infrastructure side in Germany. And in general, as I pointed out before, I believe that markets risk to be more touched once the importance of private customers is bigger, and this could be Germany and Austria, while some CEE countries are more focused on the infrastructure side, which we believe will remain definitely more stable.——————————————————————————–Daniel Lion, Erste Group Bank AG, Research Division – Analyst [40]——————————————————————————–And maybe one additional question. Basically, also in the slides, when we think of going forward and the introduction of stimulus packages in certain countries, which are being already discussed now to lead us out of the pandemic faster from an economic point of view. Would you see that there’s room for additional stimulus really helping the industry? Or can this really be materialized given potential bottlenecks in the tender processes?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [41]——————————————————————————–Well, if you think of direct stimulus programs for construction, it would then be public construction tenders. And that’s what I said before there, I believe that we will be seeing activity again once the working situation is normalizing. Once we talk about indirect stimuli directed towards the private economy, of course, it would take a little longer to translate those stimuli in construction contracts. And there, the uncertainty definitely is bigger. I believe that public direct stimuli in construction activities could be somewhat a compensation also for the means which we’ll be lacking in the future due to the Brexit. That’s what we discussed often already in the past. That we expect that the subsidy pot for infrastructure as well as for agriculture will be going down in the EU because they have less means available because of the Brexit situation. And this is a new perspective now due to the crisis that some stimuli programs might be good for compensating the lack of means because of the Brexit situation.——————————————————————————–Daniel Lion, Erste Group Bank AG, Research Division – Analyst [42]——————————————————————————–Yes. Okay. Right. Okay. Thank you for this. And then a few other questions. One would be — and I know it might be difficult to talk about it. The cartel case obviously, of course, now covers both the pandemic issue or the pandemic topic, but still definitely, one should be expecting that at some point in time, maybe in the second half of this year, potentially, we will have a ruling on the penalties. How currently in terms of timing, can you give us an idea if possible plus, I don’t know to what extent you would, but do we have any provisions for this so far? And how much would this be?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [43]——————————————————————————–Well, it is — initially under normal circumstances we would have expected a solution or a settlement, better to say, in the second half of this year. Of course, currently, we have no idea how the progress of the cartel authorities currently is because we don’t know how effective they are working on the remote working environment. I don’t have an idea about that. And hence, it is not that clear whether our expectation that we might have a settlement in the second half is still a realistic one. Definitely, it would be a positive even if that time horizon could become true. And with regard to the second question, of course, we have to think of provisions, and we have thought of provisions. But I kindly ask for your understanding that I am — for obvious reasons, I can’t give any further details upon that.——————————————————————————–Daniel Lion, Erste Group Bank AG, Research Division – Analyst [44]——————————————————————————–Yes, of course. Okay. And then one last one. Regarding the CapEx plan for this year. Could you give us an indication of how you plan your investments in the light of liquidity optimization? Of course, you don’t have to relate the big focus of liquidity, but still, I guess, you will have a focus on this.——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [45]——————————————————————————–Yes. We already had a focus on that once the crisis was not yet there, and it was always our ambition to have a lower CapEx this year than last year. Because also our initial guidance regarding the output was a little lower than last year. Given the new situation, I would expect our net invest to be down to EUR 450 million to EUR 500 million.——————————————————————————–Daniel Lion, Erste Group Bank AG, Research Division – Analyst [46]——————————————————————————–Okay. Yes. And sorry, one really last one. Facility Management business, can you give us an update on your strategy going forwards in terms of — also your success rate in getting new clients or potential acquisitions you’re looking at in this field?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [47]——————————————————————————–Could you please repeat the beginning of that question because I didn’t get the beginning.——————————————————————————–Daniel Lion, Erste Group Bank AG, Research Division – Analyst [48]——————————————————————————–About the Facility Management, I was interested in how successful you are in gaining new clients? Or how you think about acquisitions in this field at the current point in time?——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [49]——————————————————————————–Yes. Both is true, and we have a steady inflow of new customers, and of the prolongation of existing important customers, for instance, quite recently, we have prolonged our contract with Vodafone in Germany. And we have also — there are regular press releases with regard to new and considerable customers in the field of FM. So there is a steady inflow of new customers. Of course, it will take some time to compensate the loss of the Deutsche Telekom account of the middle of last year. Thus, we are on a good way. Last year, we have taken over 4 minor FM activities in the CEE region. And also this year, we are having looks at various M&A candidates. It is true, however, that the current situation, of course, doesn’t smooth the process, and I wonder whether we will be seeing transactions in the rest of the year. But we are having targets, and we are discussing takeovers in that respect.——————————————————————————–Operator [50]——————————————————————————–And there are no more questions at this time. I hand back to Mr. Birtel for closing comments.——————————————————————————–Thomas Birtel, Strabag SE – CEO & Member of Management Board [51]——————————————————————————–Thank you very much, ladies and gentlemen, for your interest. And I hope that you will be staying healthy for the rest of the year, and I’m very much looking forward to talking to you at the next occasion. Thank you, and bye-bye.
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