Earnings call transcript: ACS Group shows strong Q1 2025 growth with €191 million net profit

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Published May 13, 2025 08:50AM ET

 Earnings call transcript: ACS Group shows strong Q1 2025 growth with €191 million net profit

ACS Group reported a robust financial performance in the first quarter of 2025, with significant growth in net profit and sales. Despite a rise in net debt due to strategic acquisitions, the company maintains a positive outlook, driven by strong performance across key segments and strategic markets. According to InvestingPro .

Full transcript - ACS Actividades de Construccion y Servicios SA (ACS) Q1 2025:

Javier Crespo, Head of Investor Relations, ACS Group: Good afternoon, everyone. Thank you for joining us in this twenty twenty five first quarter results call of ACS Group. This is Javier Crespo, Head of Investor Relations. The call will be led by our CEO, Juan Santa Maria, who is accompanied by our Corporate General Manager, Angel Garcia Tassano the Group's Financial Chief Officer, Emilio Grande and the rest of the management team. As usual, after the presentation from our CEO, we will open up for a Q and A session and look forward to hearing your questions.

Now, let me pass it on to Juan.

Juan Santa Maria, CEO, ACS Group: Thank you so much, Javier, and good afternoon, everyone, and thank you for being with us today. The group has performed strongly in the first three months of the year with solid growth in sales, backlog and net profit backed by strong cash flow generation. Net profit of 191,000,000 shows an increase of 17% on a comparable basis year on year after deducting Q1 twenty twenty four extraordinary impacts. Also, note HOCHTIVE's capital gain related to Flatiron Dragados transaction in Q1 twenty twenty five is eliminated at ACS level given it's an intra group merger. Sales were up by 35%, driven by a strong performance, while operating margins evolved positively across all segments.

In terms of cash generation, we have achieved a strong net operating cash flow of €1,700,000,000 in the last twelve months, up €390,000,000 year on year, driven by sustained high cash conversion. Thanks to the strong cash generation, net debt position at the March was €2,800,000,000 which includes the additional €1,200,000,000 from the consolidation of this and €623,000,000 of fiscal year capital allocation in the quarter, such as the acquisition of Ternan for infrastructure investments, mainly data centers, as well as €112,000,000 of shareholder remuneration. New orders during the quarter were significantly strong with €15,600,000,000 They increased more than 18 year on year and represented a 1.3 times book to bill ratio. As a result, order backlog increased to a new record level of EUR 90,800,000,000.0 equivalent to two years of work done. In addition to this Frate acquisition of Dornan, the integration of Fotaro and Dragados North America was also successfully completed in January 2025.

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We're confident we're well positioned to further expand our strong presence in a strategic growth markets with significant equity investment opportunities. Looking forward, we remain very optimistic about the future of the group and we reiterate our ordinary net profit growth target for 2025 of up to 17%. Let's look now in greater detail into the consolidated results for the period. Sales show a strong growth of 35.4% to €11,800,000,000 This solid performance was driven by robust activity across all segments, with continued positive momentum in engineering and construction and a strong growth at Turner, especially in advanced technology, further boosted by the first time contribution of Dornan. On a like for like basis, accounting for teas as fully consolidated in Q1 twenty twenty four, sales growth would still be of an outstanding 23.6% in the period.

EBITDA increased by 51.7% to €699,000,000 showing the margin expansion supported by the segment mix. Profit before tax amounted to €354,000,000 up 25.8% and was particularly fueled by the growth in integrated solutions and EMZ. We delivered strong net profit growth at 17.2% year on year on a comparable basis to €191,000,000 in line with the top end of our growth guidance for ordinary NPAT in the year. On a statutory basis, earnings per share grew by 9.4% to €0.75 The following slide shows the ordinary net profit by segment and I would underline that. First, Turner's contribution is up 72.2 reaching the €100,000,000 mark and driven by the strong growth in high-tech markets and biopharma, health and education.

CMIC is up 4.8% FX adjusted, supported by good growth in data centers and other high-tech infrastructure. E and C shows very resilient profitability as well growing at 33.7% year on year, driven by the North American operations. Abertis had resilient operational performance in the period, but had a lower contribution impacted by non recurring items such as the new tax relation in France and the timing of Easter this year. Let's turn now on Slide five to the cash flow performance. Cash flow generation continues to be strong.

Last twelve months net operating cash flow amounted to EUR 1,700,000,000.0, 3 90 million euros more year on year supported by a sustained cash flow conversion and strong growth from Turner. Working capital variation was stable, while net operating CapEx and leases increased mainly due to the consolidation of these. On a quarterly basis, cash flow reflects the characteristic first quarter seasonality and is consistent with the strong revenue growth seen during the period and also partially explained by TIS' consolidation and the decreased factor. Overall, the Group's cash generation remained very strong and we expect another solid result in 2025. Our net debt position as of March 2025 stood at €2,800,000,000 showing an increase of 1,200,000,000 since March 2024, driven again by the consolidation of TSYS net debt of €1,200,000,000 Our strong last twelve months net operating cash flow of €1,700,000,000 enabled us to carry out net equity investments and M and A of $9.00 €5,000,000 and remunerate shareholders with €712,000,000 The net equity investments and M and A in the last twelve months included the acquisition of Dornan, the additional 10% stake in TIFF, the acquisition of an additional stake in HOCHTIF, infrastructure investments, which are mostly data centers and other complementary SpatTech acquisitions.

Moving on to slide seven, our order backlog stands at €90,800,000,000 an increase of 16.5% year on year on the back of a very strong order intake of €15,600,000,000 up 18.3, boosted by significant awards in data centers, healthcare, defense and transportation and resulting in a Q1 book to bill of 1.3 times. I would like to highlight our strong position in Germany to capture the increased infrastructure investment focus. New awards in the country in Q1 have been more than double the average quarterly level in 2024. The trailing last twelve months book to bill ratio, a leading indicator of this growth, stands stable at 1.2 times, while the visibility of the portfolio is of circa two years. In the following slide, we can see a selection of recent awards.

Some key projects to highlight would be: In the energy sector, we have been appointed to design, supply, install, and commission extensions to existing near above 132 kilovolts and 330 kilovolts substations located approximately 40 kilometer north of Perth Western Australia. In the data center space, recent additional projects include Vantage 64 megawatt data centers in Melbourne specifically designed to meet artificial intelligence workload demands. We would also like to highlight the important work we are undertaking in Germany, a key market for the group. Notably, in biopharma and health and social infrastructure, we have been awarded the €190,000,000 old timber expansion of the Rosenheim Technical University Technology Park. The project includes the development of advanced laboratory and machinery facilities as well as a new student center.

In Sustenial Mobility, we were awarded a major contract for the second main line of the SPAN rail network to link the Osman Hub and Marien Hub stations in the heart of Munich. In Australia, we were awarded design and pre construction contract of the Logan And Gold Coast Farster Rail project in Queensland. Another notable project is the Stabbe Mine in Canada, where critical minerals such as nickel and copper are extracted in response to the global growth of these essential resources. And finally, we can highlight in defense the stage two construction and upgrade of the maintenance, logistics and airfield infrastructure of the rough paced Townsville in Queensland. Let us now have a look at the performance by segments.

On Slide 10, we begin with Turner. Turner has continued to deliver very strong sales growth, increasing by 45.2% to €5,800,000,000 mainly driven by organic growth in data centers, healthcare, sports and education sector. This solid performance was further supported by the first time contribution of slightly above $300,000,000 from Dornan, showing the benefit of the synergies that are starting to materialize and will continue in the future. Just to serve as reference, note that the ENR 2024 TOP 400 Contractors benchmark grew the revenue by an average of 13.8%. By contrast, even without the additional contribution from Dorner, Turner grew at 38% this quarter.

Profit before tax amounted to 176,000,000 representing an outstanding increase of 62.3%. This was accompanied by continued margin expansion of 32 basis points to 3%, reflecting Turner's successful strategy focused on advanced technology projects. Turner's commercial strength is demonstrated by its new orders of €7,800,000,000 in Q1 twenty twenty five, an increase of 10% year on year, driving order backlog to another record high of €33,800,000,000 This includes a contribution from Dornan of over €1,100,000,000 Going forward, we continue to gain visibility on the pipeline to 8% in Europe by turnaround through Dornan of over €20,000,000,000 Moving on to operations in the Asia Pacific region, we turn to CMIC. Sales registers strong growth in a sporadic areas such as data centers, social infrastructure, and energy infrastructure, and were 42% higher due to the full consolidation of this with a stable underlying performance overall. Profit before tax increased strongly by 52.2% to €118,000,000 year on year, with attributable net profit remaining stable year on year.

Our order backlog also saw a strong momentum, reaching €23,400,000,000 up 27.1% FX adjusted, driven by solid growth across all segments, particularly in data center, defense and sustainable mobility as well as the impact of TSYS consolidation. Turning now to Engineering and Construction segment on slide 12, we can see solid growth with consolidated sales increasing 17% year on year to over €2,500,000,000 driven by strong contributions from data centers and transportation, particularly North America. EBITDA margin increased by 53 basis points to 5.28, reflecting operational efficiencies across both Dracados and Octave Europe. Profit before tax grew significantly by 56.6% to €68,000,000 supported by a positive financial performance. And the engineering and construction backlog rose 10.6% to €30,700,000,000 driven by a substantial increase in new orders, up over 30% with particular strength in sustainable mobility and transportation infrastructure.

Importantly, our book to bill ratio remains strong at about 1.2 times. Looking forward, the outlook remains very positive. And I will highlight that we're particularly well positioned to benefit from infrastructure investment focus in Germany, where as anticipated earlier, our new orders have more than doubled since last quarter. Also, note that Fladar Dragados is now fully consolidated within Dragados as of January 25. Please refer to the appendix for detailed financials for Trogados.

Continuing now with Infrastructure segment on slide 13, Abertis has had a resilient operating performance. The contribution to NPAT was further impacted by changes in the tax regulation of concessions in France. Iridium, meanwhile, increased its sales by 68.4%, thanks to the additional contribution of the A13, the A2, Skyports and assets from North America. On the next slide, we take a more detailed look at the aperitif numbers. The company delivered strong revenues and EBITDA growth on a comparable basis of 7% underpinned by the geographical diversification of the portfolio and inflation linked tariffs.

Traffic has grown by a solid 1.9% supported by the strong performance of heavy vehicle traffic. We saw strong results particularly in Spain, Mexico, and Brazil, and encouraging signs of recovery in France and Chile. Regarding Abertis portfolio development, as you know, on February 28, Abertis reached an agreement to acquire a 51.2% stake in the A63 Toll Road in France. This transaction aligns with our investments for Aday to grow our EBITDA, backlog and extend the portfolio's concession life, while enhancing exposure to stable foreign currency cash flows and ensuring geographical diversification. In Chile, the Santiago Los Villas concession has begun its operational management transition as of April, further strengthening our presence in Latin America.

Abertis has improved its liquidity and financial strength with our net debt set at €22,500,000,000 slightly below the year end figure, and ample group liquidity of €7,100,000,000 A shareholder capital injection of €400,000,000 will be disbursed in Q2 twenty twenty five to support growth and strengthen the balance sheet of Abertis as part of the AI63 acquisition. Additionally, Abertis distributed $6.00 €2,000,000 of dividends to shareholders at the end of last week. Let me give you more color on the important investment by Abertis, which we announced at our full year 2024 presentation. Abertis reached an agreement to acquire a 51.2% stake in the French a 63 mile away, a square day carrier between Spain and Northern Europe. The A 63 is a 105 kilometer toll road connecting Porto Te with San Jean De Luz, an important tourist area near the Spanish border.

It is also a key route between Europe and the Iberian Peninsula for the transportation of goods serving both as an industrial and touristic route. The acquisition strengthens Aberti's portfolio and financial solidity with an asset in operation since 2013 and potential for growth during its remaining twenty six year life. In 2024, the A63 generated €170,000,000 in revenue and an EBITDA of €134,000,000 with a concession expiring in 02/1951. Thanks to Disney acquisition, Abertis reinforces its presence in one of its core markets, contributing to the company's growth and cash flow replacement strategy, extending the group's concession life. This investment, along with the recent acquisitions in Puerto Rico, Spain and Chile, demonstrate Abertis' ability to grow and maintain a balanced portfolio with a mix of hard currencies such as the dollar and the euro in countries with a stable legal framework.

In slide 17, we show the breakdown of key figures by country for our vertices portfolio. As we close our review of the first quarter results, let me now briefly summarize our solid operating performance. The group has delivered very strong sales of €11,800,000,000 growing at 35.4% year on year. Net profit stood at €191,000,000 up 17.2% on a comparable basis, in line with the upper range of the guidance for the year. And our cash generation remains very strong with our last twelve months net operating cash flow at €1,700,000 up €390,000,000 year on year.

Our backlog is a new record high of €90,300,000,000 growing by 16.5% year on year, thanks to very strong new orders of €15,600,000,000 the quarterly book to bill of 1.3 times. And looking ahead, our capital allocation priorities remain clear. We see significant greenfield infrastructure investment opportunities, particularly in data centers and Managed Lanes in The US. We remain focused on bolt on acquisitions to enhance our engineering capabilities in the strategic growth markets, as well as NMNA opportunities in brownfield core infrastructure through Abertis. Ultimately, our goal is to achieve profitable growth and long term value creation combined with an attractive shareholder remuneration while maintaining our financial discipline.

Let me conclude by saying that we remain confident in our outlook, underpinned by the strength of our business diversification and our global presence, which position us well to navigate and benefit from the current geopolitical and macroeconomic environment. We saw its fundamentals and strong growth prospects across our key markets. We're very well placed to continue creating value. Thank you all once again for your attendance today and I look forward to your questions.

Moderator, ACS Group: The first question comes from Luis Prieto. Please sir, go ahead.

Luis Prieto, Analyst: Good afternoon and thanks for taking our questions. I had a couple of questions or groups of questions. The the first one is is I would like to get some detail on the amount invested in data center land at the end of q one, what the expectation could be for the end of the year. And in this regard, there's been a lot of press regarding the involvement of third parties in in your in your potential projects. I I would like to know in in what terms and if you could update us in this sense.

And the second question is is that we have been seeing a very strong organic top line performance in Turner, as you described. However, if I look at industry data for construction spend in nonresidential selling in The US, Growth is much more contained or even muted. Is there anything we can conclude from this divergence in terms of Turner's market share competitive positioning? Thank you.

Juan Santa Maria, CEO, ACS Group: Thank you, Luis. So starting with data centers. Right now, we have around €500,000,000 invested, 200,000,000 last year and approximately 300,000,000 from every you know, the year. So the the intention is to continue investing in throughout the year. Probably, it will add another 300,000,000 to to this equation throughout the rest of of the year.

As we explained last year, our intention was to develop from scratch land and making sure that we got the permits, connections, etcetera, so we could get all these land right to build and and and obviously sign the leases with the hyperscalers. In parallel, what we're doing is we did open a process to to to bring a co investor with us because we are looking forward to to put a very strong platform together with a co investor. And and that process is still ongoing. It it's very close to a resolution, so probably we will be updating the market within the next, I would say, now to the to the end of the first half. I think that we'll be able to to give a a solid update with a potential resolution.

But until now, all of this is is very confidential. But as as I said, our idea is to bring a 50% partner to develop what is considered the next stage of our strategy, which is the entire construction and operations post signature with a hyperscaler. On The US on on The US growth, I mean, the as as you saw in general, our backlog has has grown 16%. That's year on year. And if you look more focused to to The US, Turner has seen a record order intake of around 50% versus q one twenty four.

And and, also, I mean, if you if you just focus on Turner, ninety five percent of our revenues in '24 '25 are secured, and 50% of our '26 revenues are secured as well. And I'll move to Flatiron in a minute, but just to continue, Turner, pretty much that growth has been seen through all the segments. Right? Data centers have more more than doubled, but the biopharma health care space has also seen versus the the 2024 last year has has seen a huge increase, almost doubling versus the the same amount last last year. Right?

We're seeing a similar growth in in in education. We're seeing a huge growth in semiconductors. So so in general, we we are very, very, very, very comfortable. When when you look at and your question was more about engineering and construction. When you look at Flatiron and and Drogaugos, the I mean, the the company is is seeing quite quite strong growth.

And we are very comfortable because most of the contracts that were won by Flatirons or Carlos were collaborative. And you are not seeing that in the books. You are not seeing most of that in our order book because you when you win collaborative, you just get engineering in in construction. And and as you develop those projects, you start getting the contract. But the new awards during the period has gone to 2,800,000,000.0, which is which is significant.

Now what do we expect in the in The US market and and the perspective from Trump administration? I mean, we cannot discuss what's being pretty much published by by by our companies. But what what we see is that there's a positive value for construction, especially in the high-tech sectors, data centers, semiconductors, aerospace, biopharma, that there's a lot of infrastructure programs like the investment in America, which is pretty much boosting construction in traditional advanced technology manufacturing. There's a 100% active action for industrial fixed asset investments, and there's a AI dominant strategy, which is pretty much promoting expansion of AI via the regulation. On the other hand, there's a lot of investment in traditional infrastructure, mainly highways, bridges, and airports.

And and there's also, as we've seen, a political shift in energy and technology. So a lot of the renewables have lost its its support, including hydrogen. But there's also a national emergency declaration encouraging private investments in everything else, oil and gas, nuclear, geothermal, microgrid projects. Right? So what's the impact that we're seeing and we're gonna be seeing in ACS in the in the next months?

First, a positive effect on our traditional projects, highways, bridges, airports, and and rail. Although rail is more locally funding versus federal funding, Huge investment in managed lanes. Huge. And there's huge projects coming in the pipeline. All of those supported by federal funding mechanisms like PAVSTIFIA, which have not been removed.

We are seeing faster project approvals like the NIBA reforms for environmental processes and and everything that I just said around the high-tech technology. So, I mean, we we are seeing we're remaining very optimistic on the on The US market.

Luis Prieto, Analyst: Thanks a lot.

Moderator, ACS Group: Ladies and gentlemen, we we We have another question, and it comes from Alvaro Lente. Please sir, go ahead.

Alvaro Lente, Analyst, Malantra Equities: Hi, thanks for taking my question. This is Alvaro Lente from Malantra Equities. Just following up on the question on letting a partner into the data center venue venture. Just to understand, at at what stage are you planning to let the minutes before to to help you develop up to ready to build or all the way up to cost of development sorry, out of up to COD? And whether you expect to maintain a long term holding in the projects to have a sort of a brownfield concessions there?

And then the second question, if you could provide us some guidance on working capital for the rest of the year. The swing has been a little bit higher than we were expecting to. I know you expect a significant reversal of that to, of course, nothing like we saw last year, but but maybe a a softer number for the year end. Thank you.

Juan Santa Maria, CEO, ACS Group: Thank you, Alvaro. Starting with data centers, we are currently developing in a portfolio, 2.1 gigawatts. We're looking for land plots of additional five gigawatts. Right? But so far, we have in our books committed or invested up to 2.1 gigawatts.

Some of that is it's about we're about to sign a an LOI, a letter of intent, or or or a lease agreement. Some of that already has an LOI with us. Some of that is ready to build. Some of that is in the process to be developed. So we have a 2.1 gigawatts in different stages.

Right? The idea would be sometime mid twenty twenty five to bring a partner that is going to value our current portfolio, and it's going to think the intention is to monetize 50% of the portfolio. Right? We would stay 50%. We'll monetize 50%.

Moving on, that partner will become will put the platform, and it will be the platform, the one that will be developing all the not just moving the current 2.1 gigawatts into the next stage, which is basically construction operations, but also developing the future line. That's that's intention. So, I mean, we we will you will be hearing a news in in the first few months. On on cash flow, I mean, the the first thing that I would say is what we introduced in the presentation. In the last twelve months, the net operating cash flow was around 400,000,000 better than the same period before.

And this was mainly because of July better EBITDA. Right? And that was both Turner E and C and this consolidation. The working capital was stable, and then there was an increased CapEx only that was against us of around 370,000,000. If you go for q one net operating cash flow versus q one next year, it's better by 118,000,000 year on year if you adjust by the consolidation and removing the factory.

Right? So comparable terms, 118,000,000 year on year. So we are better than what we were q one last year, which we have a stronger reversal. And then when you look at the working capital in q one, this is explained by a worse than working capital of 70,000,000 in this factoring that we reduced by 168,000,000, and the rest is very consistent with revenue growth. Right?

So that's analyzing the natural one in q one. What should we expect from the rest of the year? I mean, we we are comfortable. We believe that we're going to have a strong cash flow as we had in 2024. So, I mean, I I wouldn't at this stage, I wouldn't call it softer or or worse.

I mean, I I think we are in line to a positive 2025 cash flow.

Alvaro Lente, Analyst, Malantra Equities: Thank you.

Juan Santa Maria, CEO, ACS Group: You.

Moderator, ACS Group: Well, it seems that there are no further questions. So I will give back the floor to the management of ACS to close the meeting.

Juan Santa Maria, CEO, ACS Group: Okay. So thank you so much, everyone, for your time today. And of course, we are available for any question you want to follow-up. Thanks again.

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