OHL increases its sales 7.9% to 2 billion euros, in the first half of the year
July 29, 2016
The OHL Group has ended the first half of 2016 with 7.9% growth in sales (12.5% at a constant exchange rate) to 2 billion euros, while EBITDA, which grew by 2.7% at a constant exchange rate, was down 10.5% to 385.4 million euros under the impact of the significant devaluation of the exchange rate of the main currencies against the euro.
At the same time, the result before taxes increased 4.5% and was placed at 185.3 million euros, that is, 8.9% on turnover. The net profit was reduced to 3 million euros due mainly to a higher tax figure derived, to a large extent, from the recognition in the first half of 2015 of a 27.2-million-euro tax credit in OHL México for offsetting the capital gain from the sale of 25% of Conmex.
Financial sphere
The following developments stand out in the financial sphere in this first half of the year:
– the significant available recourse liquidity position maintained by the Group, reaching the amount of 1.2 billion euros at June 30, 2016.
– the considerable reduction in net borrowings in the amount of 497 million euros overall and 954 million euros in the case of the non-recourse debt.
– the reinforcement of the concessions business following the sale of 7% of Abertis, from which the 815 million euros in funds obtained have been used to reduce the debt with risk triggers by 591 million euros and to provide this division with an additional 224 million euros in funds for meeting its equity commitments, which will be used for the development of concessions already awarded in Colombia, Chile and Peru. The division’s equity needs are fully pre-financed up to 2018 (62% of the total).
Following this transaction, a substantial deleveraging of OHL Concesiones was achieved, lowering its corporate debt by 50% to 836.7 million and practically eliminating the risk triggers. In addition, 115 million euros of capital gains have materialized through this transaction, at the same time as reference shareholder status has been preserved, as a result of maintaining a significant 6.93% stake in Abertis.
substantial value of the listed shares (OHL México and Abertis), which are highly liquid assets with a market value at the end of June 2016 of 1 billion euros, after excluding the debt associated with the shares, which is 1.2x the amount of the net recourse debt as of that date.
Performance by business line
In the first six months of 2016, 80.6% of turnover and 80.3% of EBITDA were generated by the Group’s international operations.
The results obtained by the concessions division stands out, where sales and EBITDA from tolls, at a constant exchange rate, grew 10.6% and 8.8%, respectively, thanks to the positive performance of the concessions in Mexico, where these figures grew 11.9% and 12.4%, respectively, in local currency.
OHL Concesiones manages a direct backlog of 18 concessions, including: 14 toll road concessions, with a total of 1,070 km, one airport and three commercial ports. These figures have been reached following the award in Chile of the Camino Nogales-Puchuncavi concession, adding another 43 km in length. The concession period of the new award is 38 years, and the investment to be made totals 187 million euros. In addition to this award, there is a new private initiative in Peru called Conexión La Molina-Angamos, with 12 km in length and an investment of 445 million euros, as well as the addendum for the construction of the Chimbote Bypass set in the framework of the Northern Toll Road project. The project will call for an investment of approximately 134 million euros and includes a 34 km. dual highway.
In the case of Engineering & Construction, sales grew 8.6%. This growth is due to the increased activity in North America stemming from both the start of new projects as well as the intensified pace of production in those already underway. Specifically, in the first half of 2016, awards were obtained worth 856.2 million euros, with 77% in the area of the U.S. and Canada.
The weaker performance of the construction margins in the first half of the year were due to: an increase in the relevance of the developed economies in the project mix (the U.S. accounts for 77% of the total contracting in this period) with typically narrower margins, the delay in the start of construction work on the new concessions awarded and the scant margins registered in a number of old projects.
An additional impact on the result was the provision in the amount of 102.2 million euros in response to the revision of the final result estimates of the CHUM Hospital project, basically as a consequence of increases in costs arising from the stepped-up pace in order to complete the project on schedule.
The short-term backlog at June 30, 2016 stood at 5.7 billion euros, representing approximately 20 months of sales. The backlog presents a balanced profile both in terms of geographical location as well as project size with 87.2% originating in the home markets (31.7% from the United States and Canada and 32.6% from the Pacific Alliance) and with only 17.8% of projects of a size in excess of 300 million euros, 67% of which refer to projects for the Group’s own concessions.
Divestiture
In line with the OHL Group’s asset rotation policy, the following transactions have been carried out, all of which have delivered capital gains:
- The positive result in the amount of 114.7 million euros obtained from the sale of 7% of Abertis on June 29, 2016, at the price of 814.6 million euros.
- The sale of the concession companies of the Construction business which were held for sale (Superficiaria Los Bermejales, S.A., Concessió Estacions Aeroport L-9, S.A., Phunciona Gestión Hospitalaria, S.A. and Urbs Iudex et Causidicius, S.A.) has provided a net capital gain of 13 million euros. This divestiture has given rise to a cash inflow of 142 million euros.
- In June 2016, the Department of Transportation, Housing and Infrastructures of the Community of Madrid authorized the sale of 14% of the stake in that company to Aberdeen Infraestructura (HolCo) III B.V, with which there is also an agreement as yet to materialize for selling another 14%. The sale of the 14% stake, totaling 51 million euros, has generated a capital gain of 16.6 million. Following the sale and by applying accounting rules, the remaining 37.3% has been entered at market value (14% referring to the forthcoming sale and the remaining 23.3%), generating an additional capital gain of 24.6 million, which comes to a final result of 41.3 million.
A new stage
The capital increase and the Strategic Plan 2015-2020 signify the start of a new stage for OHL, brought full circle recently with the appointment of Juan Villar-Mir de Fuentes as Chairman of OHL and of Tomás García Madrid as CEO with responsibility over all of the operating divisions and corporate areas of the Group.
The Group is now focused on sustainable cash generation in each of its divisions, through the reinforcement of its risk control mechanisms, by redirecting the Group’s international presence towards its home markets and strengthening its capital structure to support future growth.
