Bouygues

Ladies and gentlemen, welcome to BRIC's nine-month 2020 results conference call. I'll now hand you over to Karine Addo, Head of BRIC Investor Relations. Please go ahead.

Thank you. Good morning, ladies and gentlemen. I would like to remind everyone that you can find on the company website at www.bric.com the earnings press release, the presentation we will be commenting on during this conference call, an Excel file with historical key figures for the group and each business, and the company financial statements. Statements made on this call are forward-looking statements. Such statements reflect objectives that are based on management's current expectations or estimates and are subject to a number of factors and uncertainties that could cause actual figures to differ materially from those described in the forward-looking statements. I will now turn the call over to Pascal Granger, Chief Financial Officer of Bouygues.

Thank you, Karine. I would like to welcome everyone to our conference call to discuss Bouygues' nine-month 2020 results. With me in the room are Richard Vielle, CEO of Bouygues Telecom, and Christian Lecoq, CFO of Bouygues Telecom. Following our comments, we will be answering your questions. Let's begin with slide four. The most striking point about the nine-month 2020 results is the group's excellent performance in the third quarter compared to last year's third quarter, which was already at a high level of activity and profitability. Q3 2020 results marked a major improvement compared to the first half of the year, which was strongly impacted by the health crisis. Current operating profit reached 813 million euros in Q3 2020, up 22% year-on-year, while current operating margin increased to 8%, up 1.5 points. Furthermore, the group financial structure remained robust with a high level of liquidity. Available cash at end September 2020 was €10.1 billion. Given this strong performance in Q3, we have revised our H2 2020 outlook upwards. Looking at the construction businesses on slide 5, the backlog remained at a high level of 33%. at end September 2020, offering good visibility. Activity returned to a normal level in most countries. Thanks to the strong performance of the three business segments in Q3, current operating profits returned to a positive level for the nine months. At TF1, performance of the broadcasting segment was very good, in Q3 2020. And finally, commercial momentum at WIC Telecom was good in both mobile and fixed, and top line growth was solid in the first nine months since 2020. Sales from services were up seven percent, better than expected, and the EBITDA after lease margin remained stable despite the drop in roaming due to the health crisis. Briggs Telecom therefore confirms it will generate around 250 million euros in free cash flow for 2020. Let us now turn to group key figures on slide six. Let me start by saying that given the resumption of activity, it is no longer possible to isolate the change in performance that would be attributable to COVID-19. As such, we will no longer quantify that impact. Nine months 2020 results reflected a major improvement in earnings in the third quarter following the significant impact of the COVID-19 crisis in the first half. Like-for-like and at constant exchange rates, sales improved strongly in the third quarter, growing by 1% year-on-year after declining 8% in the first quarter and 21% in the second quarter. Sales benefited from catch-up of activity in the construction businesses as well as advertiser spending at TF1 and from steady growth in sales from services at Brick Telecom. Profitability improved significantly compared to the first half of the year with current operating profit reaching 681 million euros in the nine months compared to a loss of 132 million euros in the first half of 2020. Current operating margin rose to 2.7% in the nine months versus minus 0.9% in the first half. Net profits attributable to the group also returned to a positive level. It included a contribution from Alstom of 51 million euros in the nine months of 2020 versus 238 million euros in the same period last year. The nine months 2018 contribution included a net capital gain of 172 million euros of the sale of 13% of the share capital of Alstom. Please note that the nine months 2020 contribution did not include two elements that will be accounted for in the four quarters. The 87 million euros Capital gain linked to the disposal of 11 million of Alstom's share. And the 30 million Euro gain associated with Alstom's capital increase as announced two days ago. We will now move to slide seven to focus on the strong Q3 performance. You can see that all business segments contributed to the sharp rise in current operating profit and margin compared to the third quarter of last year. This significant improvement was better than expected. First, Q3 2020 sales were stable year on year after a fall in Q1 and Q2 and were driven by strong activity in all businesses as discussed previously. The performance is particularly remarkable in France as sales were up 5% compared to the substantial level of Q3 2019. Second, all business segments implemented cost saving measures. Moreover, the construction activities also benefited from compensations linked to worksite shutdown in Q2. Those factors contributed to a major improvement in current operating profit in all business segments and current operating margin reached the very significant level of 8%. Let us now turn to slide 8 that shows the group's strong financial position. The chart highlights available cash at the high level of 10.1 billion euros at end September 2020 with 2.4 billion euros in cash and 7.7 billion euros of ungrown medium and long-term facilities of which 7.1 billion euros were without covenants. Please note that in July 2020, the group reimbursed a 1 billion euro bond at its maturity. As you can see, The debt maturity schedule is well balanced with no debt war. Moving to slide 9, you can see that net debt was nearly 3.7 billion euros at the end of September 2020, a decrease of 982 million euros compared to last year in September. Net gearing improved by 9 points over the same period. This robust financial position remains key, especially during the crisis. Please note that the net debt at 8 September does not include 450 million euros in proceeds from the sale of 11 million of Alstom's shares, the acquisition of EIT by Brick Telecom expected by early 2021, and the first instalment of the 5G frequencies for 90 million euros. Let's now turn to slide 10 to see the net debt evolution between end September 2019 and end September 2020. On slide 10, you can observe that the increase in net debt since the end of last year is mostly explained by the following four items. An outflow of 55 million euros in acquisitions and disposals, resulting mainly from the acquisition of Greenlight contracting by Colas in the US. Second, an inflow of 30 million euros, mainly linked to the exercise of stock options and the remainder of the BRIC Confiance Capital increase reserved for employees. The outflow related to the payment of dividends in September 2020 for 687 million euros. And finally, an outflow of 727 million euros from operations decreasing sharply year on year that I will explain in the next slide. Turning to the breakdown of operations for the nine months 2020 on slide 11, you can observe that. First, net cash flow, including lease expenses, was down 248 million euros year on year, reflecting the impact of the health crisis on the group's first half results. Second, net capex was down 142 million euros year on year due to early adjustments in investments in the construction activities due to the COVID-19 crisis, and then higher disposals in the first nine months of the year at Bouygues Telecom related to the sale of STTH premises to SDIF, the Asterix project. And so, you can notice on the chart that working capital requirements improved strongly compared to the same period of last year. Most specifically, the change in working capital requirements linked to the activity was lower by almost 1 billion euros from the first nine months of 2019, much better than what we were expecting in this environment. This performance was driven by the efforts made by all business segments, and most notably brick construction and collage. In addition, the change in working capital requirements related to fixed assets was affected, as we already mentioned in the first half, by the sale in June by Brick Telecom of FTTH premises to SDIF, for 222 million euros, which was monetized into cash in July. I will now turn to the review of operations starting with the construction businesses. Let's begin with the backlog on slide 14. The backlog in the construction businesses remained at a very high level at end September 2020. As you can see on the chart, it is very close from the record level reached in September 2018. Commercial momentum at brick construction and to a lesser extent at collage continued to be good. The overall backlog at end September was up 3% compared to the same period of last year. Let us now turn at the backlog on slide 15. The French backlog in the construction businesses was down slightly at end September 2020 year on year due to the health crisis and the impact of the municipal elections. Overall, good construction backlog was stable. It was down 1% at Colas with rail experiencing a 15% growth while roads in mainland France was down 8%. Indeed, the environment to roll out bids and contracts remained difficult with local authorities even though the French government implemented supporting measures. can be expected to continue in Q4 and maybe into the beginning of 2021. At Bouygues Immobilier, the backlog was down 3%. Residential reservations increased by 16% year-on-year, as delays in obtaining building permits linked to the municipal elections resulted in a lower supply. This, in fact, was mitigated by some block sales . To date, the resumption of the insurance of building permits in the residential property market is very slow, while housing demand remains solid. As you can see on slide 16, International markets remained dynamic and the good international backlog was up 6% year on year at end September. This good commercial performance was driven by civil works, energy and services, and oil. Thanks to this performance, 62% of the backlog at reconstruction and collapse was related to international markets compared to 61% at end September 2019. Let us now look at the construction activities key figures on slide 17. As I've already mentioned, the construction businesses returned to a positive current operating profit in the nine months after the strong negative impact of the COVID-19 pandemic on first half results. Activity solidly rebounded in the third quarter compared to H1 2020 thanks to a catch-up of activity in France during the summer and a return to normal business levels in most countries. This achievement was made possible thanks to the strong commitment of our employees. In France, a group-wide collective agreement was concluded allowing employees to take a portion of their paid leave during the first lockdown. We also adapted our working hours and working days to facilitate catching up our activity levels during the summer months. As you can see, profitability resumed thanks to the strength of our three business segments. Current operating profit was 133 million euros in the first nine months versus a loss of 437 million euros in H1 2020, and current operating margin was 0.7% versus negative 4% in H1 2020. This improvement was led by stronger activity which allowed a better resolution of our fixed costs and benefited from cost-saving measures as well as compensations linked to worksite shutdown in Q2. Now, let's talk briefly about TF1 as its results were released at the end of October. First, I would like to highlight on slide 19 that TF1's audience share among key target was maintained at a high level during the first nine months. As the lockdown ended, TV usage in the third quarter of 2020 was up 16 minutes year on year. Moreover, after being severely impacted Severely hit by the COVID-19 crisis in first half 2020, TF1's performance in the third quarter was very good in the broadcasting segments. Third quarter advertising revenues were up 7.5% year on year thanks to both longer viewing time and the return of advertising spending in several sectors such as food, retail, personal care, e-commerce and automotive. Current operating profit showed significant improvements reaching 58 million euros in Q3 compared to 21 million euros in Q3 last year. This improvement was linked to the adjustment of programming schedules and the optimization of programming costs which were 138 million euros in nine months 2020, including 31 million euros in the third quarter. Given the low feasibility and uncertainty of the COVID-19 pandemic evolution in France, TF1 did not set new objectives for 2020 or 2021. Now, let me turn the call over to Christian Lecoq,