TRANSCRIPT January December 2018 Financial Results Conference Call

Transcription

1 Madrid, February 28th, :00 Edited Transcript of the Ferrovial January-December 2018 Financial Results Conference Call. CORPORATE PARTICIPANTS Ricardo Jiménez Rafael del Pino Íñigo Meirás Ernesto López Mozo Ferrovial S.A. Investor Relations Director Ferrovial S.A. Chairman Ferrovial S.A. CEO Ferrovial S.A. CFO Francisco J. Clemente Sánchez Cintra Infraestructuras S.A. CFO Q&A SESSION PARTICIPANTS Bruno Silva Caixa Bank - Analyst Vittorio Carelli Grupo Santander, Research Division Equity Analyst Olivia Rosalind Peters Macquarie Research - Analyst Marcin Karol Wojtal BofA Merrill Lynch Research Division - Analyst Stephanie Fabienne D Ath RBC Capital Markets, LLC, Research Division - Analyst 1

2 PRESENTATION Ricardo Jiménez, Ferrovial S.A. Investor Relations Director Good afternoon everybody, and welcome to Ferrovial s conference call to discuss 2018 s financial results. The results report and the presentation are available to you on our website. If you have any questions you may ask them either through the to ir@ferrovial.com, or at the Q&A session of this conference call. With this I will hand over to Mr Rafael del Pino, Ferrovial s Chairman, who will be leading this conference call. Rafael del Pino, Ferrovial S.A. Chairman (00:28) Thank you, Ricardo. Good afternoon and thank you for attending the 2018 full year results presentation. I am joined here by Iñigo Meirás our CEO, Ernesto López Mozo, our CFO, and the CFOs of all of our business divisions. As you already know, we are moving ahead with the sale process of the Services Division, following the strategic review we announced last October. From October to December, we have been working with advisors on a detailed vendor and commercial due-diligence. We expect the selling memorandum to be sent in the coming weeks, and while our preference is for a single deal, the main criterion will be to optimise value. We will provide more information after closing the deal. The plan of the company looking forward is to focus on the development of the infrastructure business, mostly in high complexity concessions where we can add more value over the medium term. In construction, our strategy will be more related to our infrastructure projects concentrated in projects and markets that represent the main targets for Ferrovial. We also look to deploy capital at attractive levels combining industrial growth, with attractive shareholder remuneration. Looking to the 2018 highlights, we have closed another year of excellent growth in our Infrastructure assets, we have a higher dividend distribution from all of our main assets and we received a combined value of EUR 623 million, including EUR 135 million from Services, thanks to strong operating performance and good inflation evolution. Traffic has increased across the board, we have higher than expected EBITDA growth on our main toll roads. 407 ETR had an increase of 9.7%, NTE close to 30%, LBJ over 28%. All above the guidance provided in the 2017 since our capital markets day. Heathrow has also shown great performance this year, with traffic exceeding 80 million passengers for the first time in history. Last June the UK parliament approved the Heathrow expansion, backing the creation of the best-connected hub airport in the World. Services, after announcing its sale, is presented as a discontinued activity within the financial statements and the 2017 figures have also been restated applying the same criteria to make them comparable. As a consequence of that, we have a non-cash provision of EUR 774 million in relation to Amey and the book value of Ferrovial s participation in Amey now stands at EUR 103 million. The Services Division excluding the Birmingham contract has performed on track with the business plan. Construction has performed in line with expectations, with a tighter margin of 2.5% EBIT in the year, with cost pressure across all regions. A quick review of the main data for the year. With a robust 9% growth in terms of net income from continued activities that reaches EUR 460 million. Then net consolidated result up to the fair value adjustment for Amey of EUR 774 million that we commented before, turns into an accounting loss of EUR 448 million for the period and the next net cash position ex-infrastructure projects stood at EUR 1.2 billion, including in that figure EUR 261 million net cash from discontinued activities. If we look at the numbers with proportional consolidation, which is probably the best way to look at it from an economic point of view, infrastructure accounted for almost 90% of proportional EBITDA and proportional EBITDA is EUR 1.3 billion, close to three times the reported EBITDA figure of EUR 484 million. 2

3 So after this brief review, let me turn over the call to Iñigo Meirás, our CEO, who will discuss the operating performance of the business units. Íñigo. Íñigo Meirás, Ferrovial CEO (05:15) Thank you, Rafael, and good afternoon to everyone. Let s start by looking at the main asset in our portfolio in Cintra, 407 and the traffic in that asset grew in the year ending 2018 by 1.4%, helped by economic growth in Ontario and higher levels of disposable income, despite the worse weather conditions in 2H Both revenues and EBITDA grew by almost 10% boosted by the tariff increases. Dividends at 407 were up by almost 9%, above the 5.8% expected in the best-case model given at the 2017 investors day, so Cintra. And in the first quarter of 2019, dividend payment was already approved in the amount of CAD 250 million, which is an increase versus last year of over 10%. The 2019 tariffs beat expectations once again, with growth in line with last years. It applied from February 1. I would like to show you in the next slide, one of the latest customer satisfaction survey. This chart reflects that most of the customers perceive that they benefit from savings in terms of time, gas and maintenance that offset most of the toll costs. This is a good example of the high value for money perceived from 407 drivers. In the Managed Lanes, we continued to have an outstanding performance at our Managed Lanes in Texas. In 2018 there was excellent EBITDA growth for both assets, NTE by 30% and LBJ by 28% in local terms. We have had strong quarterly performance in NTE, positively impacted by the NTE 35 West opening. In 4Q 2018, EBITDA was 48% up and transactions by almost 19%. EBITDA margin improvement, at the NTE was 84% versus 81% in 2017 and in the case of LBJ 82% versus 79% last year. A strong traffic performance in both assets: on NTE, by almost 11% year-on-year, on LBJ by almost 7%, on the back of economic growth in the area, better connections in the network, NTE 35 West, SH 183 and 130 connectors opened to the traffic in 2H And higher capture rates than expected since more and more drivers realised the value of the express lanes. The NTE 35 West full opening took place last July, three months ahead of schedule and it has shown a strong traffic performance, with a faster traffic recovery from pre-construction levels than the NTE and LBJ. NTE 35 West runs across a very important logistic area for large companies like Amazon, FedEx or Walmart, with higher weight of heavy vehicles in this managed lane. These kind of vehicles pays from three times to five times what a light vehicle pays. Since the opening on 19 July, this asset is contributed with USD 27 million to the EBITDA. On top of NTE 35 West, new connections have been opened to traffic in the last part of 2018, bringing more traffic to the corridor. SH 183, connection between NTE and LBJ, opened to traffic in 4Q 2018 and 130 connection at the south of NTE 35 West and also connectors with downtown. All these new connections imply less construction works and better flow, which will bode well with the future growth of the assets. Taking a global view of the Toll Roads division, it is important to highlight that more than 50% of the Toll Roads EBITDA is coming now from the U.S. The division keeps growing and solid financial results in like-for-like terms, with doubledigit growth in both revenues, at almost 14%, and EBITDA by almost 14% as well, on the back of higher contributions from Managed Lanes in the U.S. and traffic growth in the majority of assets. Strong dividends, Ferrovial received during the year EUR 296 million, higher than in 2017 in the range of EUR 277 million, mainly an almost 9% dividend increase in 407. In 2019, the NTE will distribute its first dividend and LBJ most probably in The sale of the Greek toll roads, Central Greece and Ionian Roads, was completed in the last half of 2018, with capital gains reaching EUR 84 million, in line with our asset rotation strategy once they become mature. Jumping to Heathrow. Heathrow's focus on passenger experience has delivered solid improvements alongside record passenger numbers. In 2018, 82% of passenger's rating experience at Heathrow was described as great or excellent experience versus 45% 11 years ago. Excellent year for Heathrow, adding new domestic and international routes, traffic hitting new highs, while the services standard has been maintained was yet another record year in terms of passenger traffic, as Rafael mentioned before, up by 2.7% versus last year. And this year, the airport reached 26 consecutive months of record traffic growth and exceeded 80 million passengers a year for the first time ever. Comentado [ED1]: 90% or 19%? 3

4 Long-haul traffic was the key driver of growth, increasing 3.1%, with load factor improving versus In terms of the strong financial performance of the asset with EBITDA up by 4.5%, reflecting a strong retail growth, and by over 8%, and retail cost control, which has helped to reduce operating costs per passenger by almost 2%. Higher-thanexpected dividends, because of operating performance and higher inflation, have helped the dividend distribution once again in Total pay-out to shareholders of GBP 500 million, which is above the initial expectations of GBP 455 million, versus GBP 525 million established in 2017, but included in this year GBP 150 million extraordinary dividend. In terms of the RAB, the high inflection that we're seeing increased the regulatory asset base, and this is also a natural deleverage for our participation there. And definitely, it brings higher equity value to shareholders. Just for information purposes, this is the expected calendar we are working on related to the third runway. In terms of regulation, in addition to the work underway on the H7 framework, we have reached a commercial deal on airline charges to apply prior to the start of H7. This has been signed with a number of our major airline partners. And that the deal will be offered and be bid to all our airlines depending on actual passenger traffic volumes. Another benefit of the commercial deal is that it will enable all parties to concentrate on the longer-term aim of securing a regulatory settlement for H7, which will support affordable and financeable expansion of Heathrow. The deal remains subject to ratification by the regulator, the CAA. For the avoidance of that, it is not intended to replace the standard regulatory process for H7, which will continue in line with the CAA timetable. As for the numbers of non-regulated airports (AGS), strong EBITDA growth in the year, almost 6% during the year to the improvement of commercial income, almost 7%, thanks to a successful yield management in retail and corporate besides operating expenses efficiency. OpEx was down by 1.3%. EBITDA evolution since acquisition in 2014 has grown more than 43% from GBP 68 million to GBP 97 million in AGS paid out GBP 70 million at 100% of the equity versus GBP 147 million in 2017, the latter impacted by GBP 75 million dividend following the refinancing that took place in Traffic has been weak in the second part of the year, and we expect that to continue in 2019 due to the uncertainties related to the Brexit and a possible slowdown in GDP terms. Those are linked to the U.K. people travelling outside the U.K. Then move to Construction. Revenues were up by 14%, in like-for-like terms, with positive performance in all areas or regions, except for a slight drop in Webber, -2.5% in comparable terms. Ferrovial Agroman revenue grew by almost 20% in like-for-like terms, primarily in the U.S. following the start of the roads at Grand Parkway and the I-66 in Virginia, and the Denver Airport. International revenue represented 84% with relevant weight of our main markets: Poland, 32%; and North America, 28%. As we intend at the beginning, the EBIT to sales is at 2.5% due to increase of cost pressures, especially in Poland, where we expect it to remain under pressure, both in labour costs and materials at least for On Services, finally, the division, excluding the Birmingham contract, continues to perform as expected. Although the division has been reclassified as discontinued activity, in this slide, we see that figures prior to reclassification in order to analyse the performance. Revenues decreased by 4% compared to 2017, mainly impacted by the reduced activity in the U.K. and in Australia, due to the ending of the contract with the government of Australia, the Immigration Department. And this was partially offset by the incorporation of rail and MoD contracts from Carillion in the U.K. EBITDA stood at EUR 136 million, EUR 288 million less than in 2017, as a result of the impact from the Birmingham contract. Excluding this, the Services EBITDA stood at EUR 371 million in 2018, which implies a 5.5% EBITDA margin, an ending of the immigration company in Australia in October Order book at EUR 9.4 billion is in line with Looking to the different geographies. In the U.K., EBITDA margin stood at 2.8%, excluding Birmingham impact versus 3.6% in 2017, in line with the guidance provided to the market to be between 2% to 3%. Spain, solid profitability and growth. Revenues up by 2.7%, mainly driven by greater volumes in waste treatment and industrial maintenance. And EBITDA increased by 2.5%, which has solid EBITDA margins of exceeding 10%. And lastly, in Australia, we are expecting performing in line with expectations with EBITDA margin at 3.6% when guidance of the company was to be between 3% to 4%. And order book grew by almost 10% in like-for-like terms. Well, with this review of the divisional and operational figures, I will hand the call over to Ernesto, our CFO, who will run through our financial results. Comentado [ED2]: Very hard to hear assume it is this. Comentado [ED3]: 137 or 147? 4

5 Ernesto López Mozo, Ferrovial CFO (18:55) Thank you, Iñigo. Well, we start with this slide regarding Services as discontinued operations. We had a conference call yesterday, but I will try to add some colour on some of the questions that you mentioned and were referred to today's call. Okay. So, I mean, the main impact on Ferrovial's financial accounts are that the accounting for assets and liability is at the lower of the carrying amount and fair value, less costs to sell. That has meant that we have to take a provision of EUR 774 million as a result of the impairment of our participation exposure in Amey. And after giving effect to this provision, the book value of the Ferrovial's participation stands at EUR 103 million. A lot of you were basically asking questions about the EBITDA without Birmingham reference. Well, Íñigo just covered that. So you have seen that in 2018, ex-birmingham, there was a EUR 71 million, EBITDA ex-birmingham. Okay. So that has been the reference for the enterprise value. And of course, then we have subtracted different liabilities, external liabilities, all of them. So instead of the year-end net cash position, we have taken the average debt for the period, also some working capital adjustment and other liabilities. We are not disclosing this or breaking it down, also for commercial reasons, as you can imagine. But there is no subtraction in the internal liability, right? So all our exposure, bid, equity or shareholders' loans amounts now to EUR 103 million, okay? So, there were some back-and-forth questions with analysts, and we prefer to take that off from now. Okay, then regarding the rest of this slide, we can see that both Services and net profit and Amey provision are included as discontinued operations, and we have restated the 2017 figures. Also, by comparison, you will see that the continued operations keep growing really along all the lines. Okay. So very important also to bear in mind that the remainder of the Services division has not been adjusted, and this is also part of the way the accounting rules work. In case the fair value is higher than the current book value, we cannot take a capital gain or a potential capital gain, right? So, we have not been able to net that effect against the provision of the Amey stake. Okay, so if we move now to the P&L review for Well, the operating part has been covered already, and I will look at the lines below EBITDA. So, we had the impairment and disposals that amounted to EUR 82 million, mainly due to the capital gains from the sale of the stake in the Greek toll roads, Central Greece and Ionian Roads, for the sum of EUR 84 million before tax. And basically, all of the contributor below the line is the net financial result, where you see there was an improvement this year, vis-à-vis 2017, and it is basically to lower interest costs on some debt. I mean, Broadspectrum doesn't have any longer high yield and has cheaper debt. And also, our inaugural bond at Ferrovial was also cancelled, and those debts were higher than the average. Of course, also, the net cash position has been able to enjoy a higher interest rate environment. And that has helped to reduce the overall financial cost of the company. Then in terms of the equity accounted affiliates, with the 407 ETR contributing EUR 136 million and Heathrow EUR 70 million, an excellent operational performance as followed through the different lines. Only in Heathrow, we don't have the benefit of last year's positive mark-to-market of the hedging instruments, it is positive, but minor. And that affects the growth, but all the lines are contributing healthily. The net income from continued operations, as I mentioned, has grown by 8.6%. And the number for the discontinued activities operations, including the Amey fair value provision of EUR 774 million, plus the net profits on services of EUR 77 million lost. With all these impacts, the net income of the total group reached a negative or loss of EUR 448 million versus the gain of EUR 454 million in Very important to remind you all that the provisions are a non-cash provision, the fair value one. Okay, so if we move into the cash flow generation, ex-infra, we have the next slide where we can go first through the sources of our cash and that were highlighted in the prior slides. We have more than EUR 600 million coming from projects, quite a substantial increase, very good contribution from the 407ETR and airports, as mentioned before, and Services also contributed from projects and concessions that reached EUR 131 million, mainly in Spain. In terms of EBITDA, we have EUR 144 million, and we are also taking the adjustment of the non-cash impact of the Birmingham provision. So, I can anticipate a question of, what has been the cash outflow regarding the Birmingham provision? You remember it was EUR 236 million, so the difference between EUR 236 million and EUR 155 million has been the cash outflow regarding that provision. Then we have the disposals that reached EUR 230 million, and the rest of sources has been financing of EUR 105 million. Where has that cash gone into? Well, the first one is shareholders' remuneration at EUR 520 million. Then we have working capital consumption, and I will break down that a little bit. We have, at Amey, a consumption of EUR 128 million, and the main contributors are pretty similar in size. One of them is the reduction of payment days to suppliers, and that is in the round of the EUR 40 million, and we also have the CapEx of the life cycle at the Sheffield contract. 5

6 That is a similar amount - that is the main explanation of the working capital consumption at Amey. And both items are not expected to repeat in And then the other part, that is a remarkable point, is the working capital consumption at Budimex and also around EUR 120 million. Okay, so the comparison also, I mean, in 2017, was flatter by the collection of advance payments from some big financial closings of projects in the U.S. There has been none of that in the group this year. Okay, so after the working capital review, we go to investments of EUR 332 million, and then orders covering all the different items, and we've reached a net cash position, ex-infrastructure projects, of EUR 1,236 million. Okay, so very important is when you look at the balance sheet, you will see that there's EUR 261 million in the held-for-sale, exinfrastructure projects, with Services. Of course, that's cash that will be available eventually for shareholders. Okay, so after that review of the cash elements, I will hand it back to Rafael for the shareholder remuneration and concluding remarks. Rafael del Pino, Ferrovial S.A. Chairman (27:47) Okay. Thank you, Ernesto. Well, you have already read in the press release that the Board has today proposed a scrip dividend and share buyback similar to last year for the approval of the General Shareholders' Meeting. And I would like to wrap up the call by taking the message to the shareholders that we are working to improve the company's performance through forming levers. One is the divestment of the Services division. The second one would be mitigating risks in contracting by concentrating on a fewer number of geographies and adequate type of projects. The third one will be prioritising capital allocation to U.S. infrastructure assets as opportunities arise. And lastly, we'll be managing properly our current infrastructure assets to maximise return to shareholders. And it must be noted that NTE will distribute its first dividend in this year, in 2019, and we expect LBJ to do the same in And with this, I would like to close the call. Thank you for your time today, and we open now the floor to any questions you may have. Q&A SESSION PARTICIPANTS Operator (Operator Instructions) And our first question today comes from Bruno Silva from CaixaBank. Bruno Silva, Caixa Bank Analyst (29:40) Q: Yes, good afternoon, thank you very much for taking my questions. The first one, starting inevitably with Services sale, just to clarify 2 points. First, are you going to set a deadline for receiving offers for this year? And I assume that that given that you have assumed it as a discontinued activity, you should have a deadline this year, but are you setting a deadline for receiving offers? And relating with Birmingham and the impairment that you have then, have you accounted any amount, undisclosed amounts for potential exits from the contract? Second, inferring from Slide 26 on capital allocation priorities that are widely known, can we infer also that ADP process is not a priority for Ferrovial anytime soon? And thirdly, I would appreciate if you could provide a little bit more colour on the outlook for the Construction business next year in terms of previous guidance that you had given in terms of margins, and any other aspect that you find critical to help us in setting our estimates. Thank you very much. Ernesto López Mozo, Ferrovial, S.A. CFO (31:02) A: Okay. Thanks, Bruno. This is Ernesto. I will take the first ones regarding the divestment of Services. Well, just about the deadline for offers, yes this will be natural, but the clock starts ticking when we send a documentation away. So, it will be the regular process of information out, non-binding offers, and then after that, we will be selecting. But as we have said previously, we'll retain flexibility in general around the process. And you're right, everything is expected to 6

7 close this year, no further comments on timing in the 12 months, okay? Then you were talking about an amount set aside for the exit of the Birmingham contract. When I discussed the enterprise value from EBITDA and then I talked about liabilities, I'm not breaking that down. We don't disclose that. I mean, we don't disclose if it's included or not for commercial reasons, okay? So, we won't give any information on those liabilities on if it's included or not any exit amount. And then the next question regarding ADP, Íñigo will take it. Íñigo Meirás Amusco, Ferrovial, S.A. - CEO (32:15) Hi, Bruno. Good evening or good afternoon, depending where you are. I think in terms of ADP, we have to recognise that we are following the process. But as you know, it's at very early stage, And I think, at this stage, we are waiting to see how the process evolves because there is not a clear decision taken by the French government to proceed one way or another, selling the majority stake or non-majority stakes. Regarding the cost tax and outlook, I think Ernesto mentioned something related to our views for 2019, is that you will see the margins at the current levels, at least for the year But in terms of 2021, that can be more positive because we think that you can see a slight recovery in margins, more driving for our operations in Poland and in the U.S. Bruno Silva, Caixa Bank Analyst (33:11) Okay, thank you very much. Operator (33:16) Our next question comes from Vittorio Carelli from Santander. Vittorio, please go ahead. Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst (33:21) Good evening. Three questions. I will do these questions one by one. So, the first one relates to Heathrow. There was a published WACC, right, of 2.8 something, right? Does it make any sense for Heathrow to invest in the third runway with this WACC, taking into account that the capital is much higher? So, can you refuse to go further in the third runway investment? Ernesto López Mozo, Ferrovial, S.A. CFO (33:54) Okay. So, you were asking to answer you one by one, right? Well, first one, this WACC refers to air traffic control. So, it has some resemblance, but not really the same as the other studies that have appeared by PwC. And we also have said that I mean, takes down the reference, but it doesn't make t that analysis, okay? And basically, for expansion, things have to be worked out. So, it's too early. And our expectations, of course, is that there is a duty for affordability and financeability that is attractive to invest. So that's the only comment we have. Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst (34:41) Okay. Second question. You said, the Chairman said that you are looking for a single deal to maximise price for the services. What does it mean, that you want to sell the whole perimeter to a sole buyer? Because if this is the case, is this the right way to maximise price? Ernesto López Mozo, Ferrovial, S.A. CFO (35:02) Okay. Basically, we have received a wide number of inquiries or expressions of interest that there has been, let's say, more emphasis in the whole. But all options remain open, and maximising value will depend on the different offers, right? So, it's not the time to second guess. 7

8 Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst (35:27) Okay. Third question, can you repeat, please, the nature of this non-cash impact from Birmingham provision of EUR 155 million, which is between the sources? Apologies. Thank you. Ernesto López Mozo, Ferrovial, S.A. CFO (35:41) No, the only thing that I mentioned, when I was covering the slide, is that the provision has been EUR 236 million that we spoke about in February, okay? And that provision still has EUR 155 million outstanding. So, the difference has been basically using up the provision and cash out. Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst (36:03) Okay, thank you, I m finished. Operator (36:07) Our next question is from Olivia Peters of Macquarie. Olivia, your line is now open. Olivia Rosalind Peters, Macquarie Research - Analyst (36:13) Good evening everyone. My first question is to do with the Managed Lanes. Obviously, you're saying the NTE is going to pay excess dividends this year and the LBJ in 2020? Ernesto López Mozo, Ferrovial, S.A. CFO (36:27) But we are not getting anything. You could basically speak closer to the microphone? Olivia Rosalind Peters, Macquarie Research - Analyst (36:32) Hi, sorry. Can you hear me now? Ernesto López Mozo, Ferrovial, S.A. CFO (36:35) Loud and clear. Olivia Rosalind Peters, Macquarie Research - Analyst (36:37) Okay. Great. Sorry about that. So obviously, the NTE and the LBJ are going to pay dividends this year or next year for the first time. With that, my understanding is that you will refinance the debt at those assets. My question is really, given you're going to be losing the cash flow that comes from Services, can you releverage those assets to accelerate dividend upstreaming to replace some of the Services cash flow? That's my first question. Ernesto López Mozo, Ferrovial, S.A. - CFO (37:07) Thanks. Paco's is working on all that. He will give the answer. Francisco J. Clemente Sánchez, Cintra Infraestructuras S.A. - CFO (37:15) Hello, Olivia. This is Paco. Well, the monies that we are going to refinance now NTE and most likely LBJ as well. The idea is not to renew because according to the contract, we should share the refinancing gain with the grantor. 8

9 Olivia Rosalind Peters, Macquarie Research - Analyst (37:34) Okay, and so when do you foresee a scenario where all of your dividend is covered by infrastructure cash flow? In that case, how long will it take to get there? Ernesto López Mozo, Ferrovial, S.A. CFO (37:49) Well, just because, I mean, what happens next year, then it's a matter of how you, in the financial expenses, are coming down. So, everything is working for more coverage. But on a gross basis, it should be next year. Olivia Rosalind Peters, Macquarie Research - Analyst (38:04) Okay. All right. Because the dividends of the LBJ and the NTE are going to pay are initial special dividends because the cash has been tied up. It's not really an underlying. Is that correct? Ernesto López Mozo, Ferrovial, S.A. CFO (38:14) Right. But we expect that underlying every year after that. And as Paco mentioned, I mean, we are not looking to renew. So basically, the growth of operations will be providing a very good floor. Olivia Rosalind Peters, Macquarie Research - Analyst (38:30) Okay, thank you. Operator (38:34) Our next question comes from Marcin Wojtal from Bank of America Merrill Lynch. Please go ahead, Marcin. Marcin Karol Wojtal, BofA Merrill Lynch, Research Division - Analyst (38:40) Yes, good evening. A couple of questions here. I just wanted to come back to Construction. You mentioned that you're looking to reduce the risks, and you want to concentrate on areas where you have synergies with infrastructure assets. So, are you suggesting perhaps that you could be looking to exit some countries or some businesses in the Construction division? Could you provide a little bit more colour, on what is your thinking in terms of your, let's say, strategy for Construction? And question number two, regarding Heathrow expansion, I mean Heathrow has indicated that they could consider a capital increase to fund the third runway construction. I mean, could you confirm you would be interested to fully subscribe to the capital increase to keep your stake at 25%? Íñigo Meirás Amusco, Ferrovial, S.A. - CEO (39:39) Okay. Regarding the first question, Íñigo Meirás speaking, in terms of Construction, what we are saying is, I think, that, today, among five countries, U.S., Canada, Spain, Poland, U.K., and if it was in Australia, we'll have more than 90% of our revenue in the Construction division. But for the last year, full year, we were testing different markets, and an example of that is the Middle East. And after that testing, we decided to be more focused in the core-core markets that I mentioned to you before. And this is the main driver or the strategy of that. I think not to open the opportunity to expand the construction activity to minor geographies. Ernesto López Mozo, Ferrovial, S.A. CFO (40:24) Well, regarding Heathrow, and basically 2-runway Heathrow keeps providing dividends. And of course, there will come a time when you have expansion, and our plan is to basically invest there. So that's our base plan. If it changes, we'll let you know. 9

10 Marcin Karol Wojtal, BofA Merrill Lynch, Research Division - Analyst (40:45) Okay, thank you very much. Operator (40:49) Our next question is from Stephanie D'Ath from RBC. Please go-ahead Stephanie. Stephanie Fabienne D'Ath, RBC Capital Markets, LLC, Research Division - Analyst (40:56) Hi, thanks for answering my question. Maybe rephrasing Marcin's question slightly differently, but what's the strategic rationale to, for instance, remain invested in Budimex if your plan is to focus on Construction, where you're over that with concession? Secondly, what are your plans with the cash you will be getting from your Services disposals? And maybe linked to that, if you could give us your views on sort of SNC-Lavalin's stake disposal to 407. Would you be interested in buying or adding to your 407 stake or, maybe if there is a good buyer, ready to pay an expensive multiple? So, would you be ready to sell some of your stake in that profile? Thank you. Ernesto López Mozo, Ferrovial, S.A. - CFO (41:50) Stephanie, the line was not that great. I will try to redo the questions, and we'll take them. I guess, that the first one was if we were entertaining divesting in Budimex. Please confirm if that's the case? Stephanie Fabienne D'Ath, RBC Capital Markets, LLC, Research Division - Analyst (42:07) Yes. Ernesto López Mozo, Ferrovial, S.A. - CFO (42:08) The other one was use of cash coming from the Services divestment, capital allocation there? Stephanie Fabienne D'Ath, RBC Capital Markets, LLC, Research Division - Analyst (42:14) Yes, yes. Ernesto López Mozo, Ferrovial, S.A. - CFO (42:15) Okay. And the third one was longer and was about SNC-Lavalin and potential divestment of the 407, and if we were interested? I mean, I missed that a little bit and was quite long. If you could repeat that one, please? Stephanie Fabienne D'Ath, RBC Capital Markets, LLC, Research Division - Analyst (42:29) Yes. So would you be interested in adding to your 407 stake if they are selling? I think you have a right of pre-emption if the buyer they find is not paying as much as you think it is worth and, therefore, you'd be ready to step in and buy more? Or if the buyer is actually paying expensive multiple, would you be looking at maybe even selling yourself a small stake to that buyer? Ernesto López Mozo, Ferrovial, S.A. - CFO (43:00) Okay, Stephanie. So, with 407, before we said that our bid offer was quite wide. So normally, things happen in between, but we will have to analyse at the time. Regarding the proceeds from the, let's say, divestment from Services, it was covered by Rafael in the first slide. I mean, we're looking to invest in infrastructure for shareholder remuneration the normal balance, but too early to tell any breakdown on how that would be done. 10

11 Íñigo Meirás Amusco, Ferrovial, S.A. - CEO (43:32) And regarding Budimex, I can say that at this moment in time we are not considering any strategic review of our stake in Poland. Stephanie Fabienne D'Ath, RBC Capital Markets, LLC, Research Division - Analyst (43:41) Thank you. Operator (43:48) At this time, we do not have any further questions from the phone. Ernesto López Mozo, Ferrovial, S.A. - CFO (43:53) Okay. We have some questions that came through the Internet. I mean, one of them is if we could provide the book value of the whole Services division. Well, it's in our accounts. And I will save you some time just by saying the ballpark number of the combination of all these things is slightly north of EUR 1.6 billion. That includes everything: Spain, Amey, international division and Broadspectrum. Okay, then we have a question regarding the Heathrow deal in And well, this was covered by the Heathrow conference call. And they retain the flexibility, given I mean, flexibility given the certainty that Heathrow tends to do better. But we have to wait and see how the developments in the U.K. proceed. Okay, so I think this is it from questions from internet because the other one was about capital allocation and the proceeds from the sale of the Services division. So, having covered all that, I'll hand it back to Rafael. Rafael del Pino, Ferrovial, S.A. - Chairman (45:15) Well, all I have to say is thank you very much, and goodbye. Thanks for spending some time with us. 11