OHL - One Year
All,
Please refer to our unchanged analysis here.
The restructuring was approved by court and ratified by shareholders in April (after quarter-end). Our model already reflects the restructuring, having expected it to be booked in Q1 already. As a result, there are some timing differences in the cash flow. That said, the company seemed to have a relatively strong Q1 (see below) and ended the quarter with EUR 35m more cash than we had anticipated.
Performance guarantees extended to one year:
- This extension is very good news for the company and its stakeholders and has been an important cornerstone of our investment thesis.
- A key issue for the company has been persuading its banks to extend their performance guarantee lines without which a construction company cannot function for long. Going into the restructuring, the banks' insistence on 6-month rolling extensions have been stymieing growth in the construction business.
Order Book:
- Short-term book up 3.9% sequentially to EUR4.7bn (down 2.5% year on year). The short-term book is 89.5% in line sequentially and annually.
Sale of Toledo Hospital Stake:
- In April (post-quarter-end) OHL completed the sale of its stake in Nuevo Hospital de Toledo. The EUR74.6m proceeds was in line with expectations and will be received in Q221. The sale was agreed in November 2020, so the completion - post-restructuring - was no surprise.
Q1:
- OHL slightly outperformed our model in the first quarter with GM and EBITDA both coming in EUR15m above our expectations.
- Gross Margins were boosted by an improvement in margins in the Construction division and continued cost control allowed this to translate down to EBITDA. Clearly a positive, although to what extent those improvements have amounted to a mild window dressing ahead of the restructuring remains to be seen in Q2 perhaps.
- The seasonal working capital outflow was EUR21m less than our model at -EUR129.5m.
- We had also expected most restructuring costs and the restructuring itself to be booked in Q121, which should now come in Q2.
- Net net, ignoring timing effects, Q1 cash balance stood EUR35m higher than we had modelled.
Happy to discuss the details and any ideas.
Aengus
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E: amcmahon@sarria.co.uk
T: +44 203 744 7055