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Mota-Engil 1H2018 Results

31 Aug 2018

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Mota-Engil: 1H18 turnover increased by 5%y/y to €1,251mn (or €1,256 excluding IAS29), vs. +18%y/y in FY17, reflecting the transition phase between ending some relevant projects and the starting stages of other new projects in Latin America and Africa. The slowdown in revenue growth was mainly explained by Africa (+4%y/y in 1H18 vs. +22%y/y in FY17) and Latin America (+4%y/y in 1H18 vs. +32%y/y in FY17). Revenues in Europe rose by 7%y/y in 1H18 (vs. -2%y/y in FY17). E&C turnover rose by 16%y/y in 1H18 (vs. +5%y/y in FY17), on the back of a positive evolution in Poland and in Portugal. E&S turnover fell by 5%y/y (vs. -10%y/y in FY17).

EBITDA stood at €176mn (or €180mn excluding IAS29), -5%y/y (vs. +19%y/y in FY17). EBITDA margin reached 14% in 1H18, -2pp y/y. EBITDA from Europe fell by 25%y/y to €47mn in 1H18 (vs. +28%y/y in FY17), on a 12% margin (-4pp y/y). EBITDA from E&C stood at €1mn in 1H18, negatively impacted by the execution of some projects awarded in a challenging context, while EBITDA from E&S declined by 17%y/y to €46mn (on a 32% margin, -4pp y/y). In Africa, EBITDA reached €82mn (+6%y/y), on a 23% margin (-1pp y/y), while in Latin America EBITDA rose 12%y/y to 42mn (9% margin, vs. 8% in 1H17)

Total backlog rose by 2% since YE17 (or +€114mn). Net debt amounted to €1,002mn, including €150mn of Angolan sovereign bonds (2.5x LTM EBITDA). Total net debt, including €150mn of Angolan sovereign bond reached €1,136mn (2.9x LTM EBITDA). Change in working capital stood at -€44mn (vs. +€19mn in 1H17).

Mota-Engil: Key takeaways from 1H2018 results conference-call:

Africa: EBITDA margins stood at 23%, above the guidance of 20% issued in 2017. All the African countries where Mota-Engil operates contributed to the strong performance. The company expects a low double-digit topline growth in Africa. The group has also referred that Sonangol continues committed, hence there should be no changes to its strategy in Angola.

Europe: EBITDA margins diminished 4pp to 12% in the 1H2018, however the company said it was in line with its expectations. The margins squeeze was due to raw materials´ price escalation and higher labour force costs in Poland and due to projects of small ticket in Portugal that tend to have more competitive tenders. However, the company is confident and referred having won recently new road projects in Poland, with higher margins than the previous contracts that will help to restore profitability in the European division.

Net debt: The company expects the net debt to diminish until the end of 2018, mainly due to capex forecast reduction. The average cost of debt decreased in the 1H2018 from 5.6% to 5.1%. The company´s goal is to accumulate more debt in local currencies, in the countries where it operates.

Tax rate: The corporate tax rate increased in the 1H2018 due to the expiry of tax exemptions in Angola at the end of 2017.

Capex: The forecast for the 2018 capex has been revised to the downside, due to some delays in investment in EGF and optimisation in some Latin America and African projects.

For further information, or to receive the PDF file, please contact +351 912 897 835 or research@fincor.pt

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