Bouygues

Ladies and gentlemen, welcome to the BUIC 9-month 2021 Results Conference Call. At any time during the presentation, you can press star 1 to enter the Q&A for the question and answer session. I will now hand over to Karine Adam, Head of BUIC Investor Relations. Please go ahead.

Thank you. Good morning, ladies and gentlemen. I would like to remind everyone that you can find the company website at www.buic.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 its 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 incentives 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 Danger, Deputy CEO and CFO of Bouygues.

Thank you, Karine. Good morning to all of you and thank you for joining us to discuss Bouygues 9 months 2021 results. With me in the room is Christian Lecoq, CFO of Bouygues Telecom. Following our commands, we will be answering your questions. Let me discuss the main highlights for the first 9 months results as shown on slide 4. First, in line with the first half of 2021, the Group's results over the first 9 months showed strong improvement on a return to their pre-crisis level, which is very good news. Second, the Group generated a strong free cash flow and its financial structure remained very solid. Third, in an environment which continues to be uncertain, the group confirms its outlook for 2021, which has already been revised upwards in H1. And finally, you know that we are very enthusiastic as we signed a purchase agreement with Engie to acquire Equance for an enterprise value of 6.7 billion euros. Following your feedback after our conference call on equants last week, I want to clarify a few points. We perfectly understand that the situation is not ideal for you regarding the information we can give on equants. However, we have committed to ENGIE not to disclose any figures on equants until the closing date. We must respect this confidentiality and unfortunately, This uncomfortable situation will last a few months. I want to be very clear. We had access to all necessary data during the due diligence process in order to make our binding offer. Based on what we have learned, we are convinced that we will be able to improve Enquant's margin to best-in-class level. The results of the operational efficiency plan deployed over the last two years at Bouygues Energy and Services has proved it quarter after quarter. At closing, we'll be able to communicate a roadmap and intermediate objectives. In the meantime, I must ask you to be patient. Let us now turn to the group's key figures on slide 5 to review this good performance in more detail. Group sales for the first nine months of 2021 reached their pre-crisis level at 27.5 billion euros. Compared to the same period of last year, they are up 10% with all our business segments delivering growth. The growth was stronger in France and in international markets as French activity was impacted by a strict lockdown from mid-March 2020 before recovering gradually. Nine months 2021 current operating profit improved by 23 million euros compared to the first nine months of 2019, thanks to improved profitability at TF1 and Colas, and higher volumes and eBPU at Bouygues Telecom. At 4.1% current operating margin is back to its nine months 2019 level. We are therefore well on track to achieve our guidance for the full year. Net result attributable to the group for the first nine months of 2021 is much higher than one year ago and slightly below 9 months 2019, notably due to lower contributions from Alstom. And finally, the group generated 805 million euros free cash flow. This level of free cash flow is well above 9 months 2020 and 9 months 2019, including Alstom's dividends in 2019, which amounted to 341 million euros. Let us now move on to slide six that highlights a group's strong financial position. At end September 2021, net debt was 2.6 billion euros, which is a historical low for a nine-month period. Compared to end September last year, net debt was down 1 billion euros, a significant reduction. The strong cash generated by operations of 1.1 billion euros and the disposal of Alstom's share capital for a total of 1.4 billion euros more than covered both the acquisition of BTBD for roughly 800 million euros and the payment of dividends for 738 million euros. Net gearing decreased by 10 points over the same period to 22%, reflecting that very strong situation. Last, after the announcement of the purchase agreement with Engie to acquire Equance, credit agencies Moody's and Standard & Poor's issued press releases on 10th of November regarding BRICS rating. Moody's rating is maintained at A3 with a stable outlook. Standard & Poor's rating is A- with credit watch negative. These ratings reflect the sound financial profile of the group. Moving to slide 7, available cash was at the high level of 12 billion euros compared to 10.1 billion euros one year ago. It included 4 billion euros in cash and 8 billion euros of undrawn medium and long-term credit facilities with no covenants. As you can see, the debt maturity schedule is well balanced with no debt war. Please note that this maturity schedule does not yet include the issuance of €800 million of bonds at the end of October with a coupon of 0.5% held in anticipation of the reimbursement of the same amount scheduled in February 2022. As such, the Group relies on a particularly strong financial position, which remains a major asset to strengthen its business segments and accelerate their growth, notably in the context of equance. Let's now turn to slide eight to see the net debt evolution between end December 2020 and end September 2021. You can observe that the moderate 652, 56 million, sorry, euros increase in net debt since the end of last year is mostly explained by the following four items. First, the positive impact of 984 million euros of proceeds net of fees from the sale of Alstom shares in March on June 2021. Second, an outflow of 66 million euros related to share buybacks which more than covered the exercise of stock options for 51 million euros. Third, an outflow of 738 million euros related to the payment of dividends. And four, an outflow of 853 million euros from operations increased by 126 million euros year on year that I will explain on the next slide. As you can see, we also included the 9 months 2019 figures to assess the evolution compared to a standard year. Turning to the breakdown of operations for the 9 months 2021 on slide 9, you can notice that first, net cash flow including lease expenses increased by roughly 600 million euros, a significant improvement reflecting the increased activity in all businesses. This level is also higher than in nine months 2019. Second, net capex was up 334 million euros mainly due to big telecom in line with its strategy of running out 5G, fiber networks and enhancing network quality. And third, as you can see on the chart, working capital requirements related to operating activities increased by around 390 million euros compared to the same period of last year, reflecting the stronger level of activity. Compared to nine months 2019, working capital requirement is at a lower level demonstrating the efforts made by all business segments. I will now turn to the review of operations starting with the construction businesses. Let's begin with the backlog in the construction businesses on slide 12. At 31.8 billion euros, the overall backlog at end September 2021 was at a high level, providing good visibility on future activity. The share of the order book in international markets was up two points year on year, representing 64% of the backlog at brick construction and collage, with new contracts worn in third quarter shown on the right side of the slide. For example, Colas won three road contracts in Ontario for 126 million euros. Furthermore, Bouygues Construction won a contract for the building of a student housing project for 194 million euros in assets in the United Kingdom. Let's now look at some details by business segments on slide 13. As you can see, the momentum at Colas remains strong. The backlog reached the very high level of 9.6 billion euros, up 4% year on year, driven by strong international business momentum. Indeed, at the end of September, the international backlog increased year-on-year by 9%. The decline in brick construction backlog reflects a high basis of comparison related to the very low backlog drawdown during the lockdown period and the award of a number of major projects in the first half of 2020. Moreover, there was a lower volume of significant deals processed in 2021. we believe volume should be higher in 2022. At Bouygues Immobilier, the dynamic in residential reservations remains strong, upsurging year on year in nine months 2021, reflecting solid customer demand. The volume of building permits submitted also improved compared to nine months 2020, providing good prospects for future activity. However, delays in obtaining building permits are still very long, and we therefore have a lower supply of available units. Regarding commercial activity, clients are in a wait-and-see mode, and as a result, the backlog was down 15% year on year. Let's now look at the construction activities key figure on slide 14. Pages and results showed strong improvement compared to nine months 2020, which was significantly affected by the pandemic. Compared to the nine months of 2019, results for the construction activities are close to their pre-crisis level. Overall sales are still down by 5% due to a high comparison base. Let me remind you that France experienced a high level of activity in 2019, one year before the municipal elections. At €515 million at the end of September 2021, current operating profit is close to the figures of end September 2019, and current operating margin returned to the level of the first nine months of 2019 at 2.5%. It benefited from the improved profitability of COLAS with a current operating margin of 2.4% compared to 2.2% in the first nine months of 2019. Big energy and services margin has also improved over the same period from 1.8% to 2.4% for the first nine months 2021, thanks to the operational efficiency plan implemented two years ago. Now, let's talk briefly about TF1's results on slide 16, which were released at the end of October. CF1 released a very good set of results which showed a strong improvement year on year compared to nine months 2019. Sales were up 21% compared to nine months 2020 and up 2% compared to nine months 2019. They benefited from, first, a strong momentum in TV and spending, even though third quarter 2020 was a tough basis of comparison. And second, the good performance of new production activities. Current operating profit of 223 million euros showed a significant increase both versus 9 months 2020 and 9 months 2019. As a result, current operating margin rose significantly by 4.3 points to 13.5%. In this context, TF1 revised upwards its full year guidance and now expects its 2021 current operating margin to be above 12%. Now, let me turn the call over to Christian Lecoq.

Thank you, Pascal, and good morning, everyone. Starting with slide 18, you can see that Good Telecom's commercial momentum in mobile continued during the first nine months of the year. At the end of September 2021, Good Telecom had 14.6 million mobile plan customers, including M2Ms. following the integration of 2.1 million BTBD customers and the gain of 436,000 new customers since the beginning of the year. Thanks to this performance, Google Telecom almost achieved two-thirds of its ambition 2026 target to win 4 million additional mobile customers, including M2M. Let us turn our attention to our fixed customer base on slide 19. As you can see, the total fixed customer base is 4.4 million at end September 2021, up to 104,000 customers in the first nine months of 2021, driven by FTTH. The FTTH customer base reached 2.1 million at the end of September 2021, thanks to the addition of 417,000 new customers since the beginning of the year. Almost half of the fixed-line customers now have an FTTH offer, compared with 34% a year earlier. The FTTH rollout is also accelerating. At the end of September 2021, the number of FTTH connections marketed reached 22.5 million in line with the objectives of the Ambition 2026 strategic plan. In PIN areas, the number of FTTH connections doubled compared to end December 2020, reflecting the acceleration of deployments. Here again, we remain on track to deliver our goal of 3 million additional FTTH customers by end 2026. I want to stress that this increase in volume is not detrimental to eBPU. Indeed, as shown on slide 20, our more formal strategy continues to bear fruit. Mobile eBPU and fixed eBPU were up year-on-year in the first nine months of 2021. Mobile eBPU increased by €0.3 to €20.6 restated for the roaming impact, and fixed eBPU increased by €0.1 to €28.2. On a sequential basis, both mobile eBPU and fixed eBPU were up compared to the second quarter of 2021, with respectively €0.2 and €0.4. As expected, fixed eBPU was back to growth in this third quarter, which is good news. Please do keep in mind that the eBPU figures on this slide do not include BTBD. This growth in both volume and eBPU resulted in a solid top-line growth in the first nine months 2021 as illustrated on slide 21. Total sales were strong and up 13% year-on-year in the first nine months 2021. Sales from services were up 14% over the period of 5% excluding BTBD. Performance was achieved both through mobile revenue, which was up 17%, including BTBD, and through fixed revenue, with glue, 8%. Other sales increased by 7%, a performance boosted by the increase in unset sales over the period. EBITDA facilities for the first nine months increased by 7% year-on-year at 1.2 billion euros, a performance in line with our full-year target. The EBITDA after leases margin was down as expected, reflecting the dilutive impact from the BTBD integration and a mis-effect related to the FTTH bump-up, notably in PIN areas. Progress in profit was higher than one year ago at €541 million, thanks to a non-current income of €107 million essentially related to the disposal of data centers. Finally, I would like to say that net capex was up compared to the nine months of 2020 at €878 million, which is also consistent with our annual target. Lastly, I would like to conclude that we confirm our 2021 outlook. Now, I'm pleased to hand over the floor to Pascal.

Thank you, Christian. I would like to briefly comment on the financial statements on slide 23. We have already discussed revenues and current operating profit at the beginning of this call. Other operating income and expenses were positive at 19 million euros in the first nine months. It notably included non-current income of 107 million euros at Bouygues Telecom, as Christian explained, a negative 6 million euros at Bouygues Immobilier related to adaptation measures, and last, expenses related to M&A projects at TF1 and at the holding level. You can also note that the cost of debt decreased slightly year-on-year thanks to lower interest charges and a lower amount of debt. Regarding the income tax line, where the effective tax rates was 31% in the first nine months, 2021, very close to normative level. The share of net profit of GenVentures and Associates was 202 million euros. It included the contribution of Homalstom, which was partially offset by losses at Salto at TF1 level, as well as SDIF at BRICS telecom level as expected. We will now turn our attention to the group outlook on slide 25. Based on its nine months 2021 results, the group is confirming its outlook. In 2021, sales and current operating profit should be very close to the 2019 level and current operating margin should return to its pre-crisis level. In 2022, current operating profit should continue to grow and exceed the 2019 level. This concludes our presentation. Thank you for your attention. Operator, please open the floor for questions.

Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. As a reminder to our participants, please limit yourself to two questions. The first question comes from the line of Nicolas Collet-Tolisso of HSBC. Please go ahead.

Oh, thank you. Sorry, I will start with Equant. I would like to understand why you can't communicate more, given NG has published some details the day after your conference call. So is it because the revenue or EBIT definition is not comparable to yours? I would like to have a bit more color on that. And maybe the second question is on telecoms and pricing. So the ABPU is up. Can you help us with the different triggers there? What's the contribution from backbook repricing in particular? And any color on the market pricing dynamics would be very helpful. Thank you.

As far as equance is concerned, effectively we are contractually committed not to communicate figures about equance before closing. You are right, our EBIT definition is not totally in line with what we do at the BRICS level, in particular because I think they isolate two types of charges, which are first reorganizational costs and potential impairment losses related to their But in fact, I don't have the detail of what they're precisely doing, but the first element is the most important. We are contractually committed not to communicate.

Hi, Nicolas. This is Christian about your question on Telecom. Yes, you're right. The ABPU increased mainly thanks to the work we are doing on our back book. You know that for new clients, we have two kinds of pressure on the ABPU due to new clients. you can have some promotions, especially in the low end part of the market. And second, you know that for a big part of our new clients, they may benefit from a rebate during their first year, first 12 months period in mobile and in fixed.

And are you comfortable that you can still push for more back book repricing? And do you think the market is supportive?

That's what we are doing. But at the same time, if we are able to take more volume, it could have a negative impact on eBPU, but it would be good for the future because, as you know, as I said, new clients have lower eBPUs than existing clients. So what we have to monitor is the mix between existing clients and new clients. And we have also to monitor the level of churn. So that's what we are doing. So we want to continue to increase our back book pricing, but without having a high level of churn. So we are doing that very, very carefully.

All right, Pierre. Thank you.

The next question comes from the line of Eric Lemaire from Brian Garnier. Please go ahead.

Yes, good morning. Thanks for taking my questions. I've got two. So the first one, regarding COLAF, in the press release this morning, you mentioned a 4% guidance for the operating margin, the current operating margin for COLAF by 2023. Could you maybe give us or remind us your objective of current operating margin for the two other divisions, Bouygues Construction and Bouygues Immobilier, maybe for 2023 as well, please? And the second question, on Bouygues Energy and Services, could you maybe share with us the current operating margin in industry for Bouygues Energy and Services or maybe for the nine months, please? Thank you.

As far as our profitability guidance for big construction, we aim on the medium term to have the normative level, which is around 3 to 3.5%. And secondly, your question was related to the big energy and services margin. Sorry, I didn't speak about Bouygues Immobilier first. On Bouygues Immobilier, we aim on the medium term, but it won't be in the next two years. In the medium term, we imagine to have a margin which will be normative at 6% approximately. And for your second question, The operating margin for the nine months of 2021 is, I have to check what is the figure for the nine months, 2.4% for the nine months this year. Thank you very much.

Next question?

On 2.7 for the Q3. Okay, thank you.

The next question comes from from Barclays. Please go ahead.

Yes, good morning. I had a question about the free cash flow generation. So as you show in your slides, you have a very strong progression of the free cash flow. My understanding is that this is without the working capital requirement, which has been a drag year to date, as it is usual. And I was wondering if for Q4, we should expect again, as we saw in Q4 last year, a big improvement in the working capital requirement contribution. So that's the first question.

In fact, you know, in our construction businesses, We are used to have an important swing quarter after quarter on this working capital requirement. We achieved a very good level of working capital requirements at the end of 2020, and we were thinking that probably we will have in the first half of next year of this year, a kind of regularization of that. There is two good news. We didn't see that phenomena during the first half of the year, on the 9th month of this year, and that's good news. We will have a good last quarter because it's a seasonality effect. So yes, we will have an improvement of that of that working capital requirement during the last quarter of this year.

So is it conceivable that because excluding working capital the trends are better that you could deliver a better free cash flow generation including working capital for the full year in 2021 versus 2020 or is it too early to say?

Before working capital requirements, the free cash flow will be higher than the one we had in 2020. but we don't give any forecast for the working capital requirement. As you know, in our construction businesses, some inflows could be in one year or in the year later, and it's impossible to monitor with such a level of precision. Understood.

And on telecoms, as we know, Iliad is making a bigger push on the bundled products on mobile, handset, and service revenue. I was wondering if you saw any impact there. And then lastly, if I may, in terms of your distribution, obviously you've now extended your distribution through the agreement with CIC, Crédit Mutuel, and I was wondering if you are also pushing harder in terms of your own stores this year and what we should expect in the coming quarters on that front.

So first of all, we didn't see any impact of Iliad's new offer either in the B2B business and the B2C. What is good for us, I think that Iliad has now the same strategy as us, so they are trying to They try to increase the IDPU, mainly by moving the client from the €0 to €20 offer. And you also saw that when Eliade said that they didn't decrease prices for 5G, for example, the 5G is included in their offer only in the €20 offer. So if you want a 5G offer with Iliad, you have to pay 20 euros and not 2 or 10 euros. I think it's a way for them to move their clients to higher prices and so to increase their BPU. We are doing exactly the same thing and we think it is good for us and for the market. Your second question was about CIC. Yes, since yesterday, We have begun to sell BookTelecoms offers in CIC and Credit Mutuel local branches. Before it was only the CIC mobile offers and the Credit Mutuel mobile offers. So now it is the BookTelecoms brand and BookTelecoms offers that are sold by CIC. This is a second step of our integration plan. The first step was to migrate CIC and 3D Mutual clients to Telecom's mobile network. We have done part of the job, it will continue in 2022 because in some areas we need to do before the migration to increase the capacity of our mobile network. The second step was the launch of these BookTelecom offers in the local bank branches. So that is done now. And the third step will be to migrate BTBD clients to BookTelecom's IT system. And to do that, we will do that before the end of 2023 because we need three years from the acquisition to do that because we have some job to do before to be able to move the clients from IT system to Book Telecoms 1. So, yes, to date, the integration is on a very good path.

Thank you very much.

The next question comes from the line of Alex Ronci, the Bank of America. Please go ahead.

Hello, guys. Thanks for taking the question. Just one that I would like to come back on CIC and, you know, you knew offers and their wig, which... I think I'll name Pronto on the CIC network. What is your strategy regarding the old brands from, you know, EIT? Are you trying, you know, after the migration on your network to also just migrate customers from the former brands to just WIG and maybe try to upsell them at the same time? Or are you going to consider keeping former clients of CIC Mobile and all the other MVNO brands under their former brands? Thank you.

Okay. So, Zach, First, as I said before, for new clients now, CIC and Credimql are now selling good telecoms offers. No more Credimql, like you said, the Prompto offer, or CIC mobile offers. At the same time, we keep what we call the brand licenses, like Energy Mobile, C-Disput Mobile, Auchan Mobile. So these bonds will continue and we won't change these bonds to boot telecoms offers. Regarding Credimql mobile and CIC mobile clients, existing clients, As I said, we will move them to BookTelecoms offers and BookTelecoms, so in fact, a BookTelecoms IT system, information technology system. But to do that, we need between 18 and 24 months from now. So it will be done by the end of 2023. It's a big move that we have to do. Not as easier as moving from the mobile network that we are doing now. We are doing that now. Moving from one IT system to another IT system is much more complicated.

Okay, but maybe rephrasing my question is more, if I'm today like a CIT mobile customer, will I receive like an email or a text from a WIG in, you know, let's say, you know, six months or 12 years? saying that my current CIC Mobile offer is no longer available, and that I proposed a new GUIG offer, and at the same time, that you will try to probably upsell those customers for incremental output.

Exactly, exactly. We will be able, of course, to try to put in place our more formal strategy, like for Book Telecom's client, but we will work with CIC and KBQL because these clients are also clients of these banks, and so we have to work together to look at how we will do that.

Okay, perfect. And maybe just one follow-up, if I may. I was seeing on the market recently that Orange was launching or trying to develop new, basically, shops in rural areas, some smart shops, very small shops, more localized in smaller areas. And I suppose, you know, that's because, you know, Fiverr obviously is being deployed more and more in rural areas and you guys are going to, you know, come and probably disrupt the market given, you know, you currently have a low share in those regions. Are you thinking, you know, still about, you know, trying to expand your distribution network through other agreements? I mean, you've had CIC, you've had other agreements for distribution before. Or are you thinking at some point of going more aggressively and invest more yourself with, you know, boutiques instead?

Well, as you said, first, we already have, I think, more than 500 shops. We now have the CIC CredimQL network, commercial network. And as Orange did, we are also working on a new concept to be able to maybe develop some very small shops in a very rural area. And we have also some trucks like Ron, so we are able to, like a moving shop, I would say, there are some trucks that we are able to send in the new areas where we are opening HDTH, for example.

Very clear. Thank you very much.

The next question comes from the line of Jerry Dallas from Jefferies. Please go ahead.

Yes, good morning. Thank you very much for taking my question. Question is about the sensitivity of the construction and road building activities to higher inflation rates enduring into 2022. Could you give us some color please on, you know, supply supply chain issues which might be emerging at the moment and what sort of cost inflation you see within the civil works and road building businesses And can you be confident that the operating margins in both of these businesses will expand year on year in 2022? And then just a brief clarification, please. You reaffirmed earlier the 3% to 3.5% operating margin target for CivilWorks in the medium term. And I'd be grateful if you're able to clarify it. what sort of timescale medium term means for this metric, please. Thank you.

OK. Starting with your second question, let's say that this target will be for 2023 to reach at least 3%. You are speaking about civil works, but please consider that it is building and civil works. Your second question is related to the inflation in our cost basis for construction activities. Let's say that obviously we are facing these difficulties. Increasing prices are related first to inflation, but also related to shortage of certain raw materials or equipment. I will start with the shortage. To say that obviously it's a constraint for our projects, but we are not facing at the present time to date, we are not facing some difficulties which lead to postponement of accomplishment dates and so on. So it's kind of a disorganization of our team and the costs which are related to that, but we don't have any special issue for completion dates and so the penalties, delay penalties and so on. As far as inflation is concerned, we are facing these difficulties. Let's say that we are covered by different mechanisms. The first one is, for instance, at Colas, we have very short contracts and for this reason we are able to to include in our sale price the cost of this increase of price. Secondly, we have some indexation formulas in main contracts, especially in public contracts. Therefore, we are able to transfer to our clients these increases in cost. for instance, at brick construction for private contracts. When we sign the contract, we cover, in fact, a lot of things by subcontract and so on. So we have transferred the risk to our supplier or our subcontractor. So we are transferring the risk. There is a remaining effect for us. And when we price for contracts, we have always a contingency provision in order to cover things which are not known at the date of signing of the contract. But for the moment, in general, we are able to cover this increase in prices these contingencies cover the increase in prices. Obviously, I speak to data. We can imagine that probably we'll have a remaining impact in 2022 related to inflation. But we have these four mechanisms in order to mitigate partly, at least mainly, this risk.

Thank you. That's very clear. Just one clarification, please. Is the requirement to sort of pass on higher prices, is that having any perceptible impact on end customer demand at this stage?

No, not at this stage. Thank you very much.

As a reminder, if you would like to ask a question, please press star 1. The next question comes from the line of Nauar Cristini from Morgan Stanley. Please go ahead.

Thank you very much. I have a follow-up on the 6th ADPU topic. Just thinking of the mix between the dilutive volume and price increases, how do you see this progressing from here? Do you see a point where a fixed APPU growth could reach negative territory impacted by the diluted promotions before maybe rebounding at a later stage as the promotions lapse and of course the price increases help as well. And then just on prices, I was interested to hear an update on your price increase strategy. So going from here, will you continue to work on various clusters and raising those in turn and then monitoring in turn granularly before moving to the next cluster? or do you see room for a different approach? So any color on this will be helpful. Thank you.

So first, regarding ABPU, what is important to understand is that new clients benefit from a first one-year promotion. It's not exactly a promotion. It's the fact that TAIF is cheaper during the first year. So when you have more new clients, you have a dilutive impact on eBPU. And once it is not the case, of course, it is better for eBPU. But keep in mind that when your growth is higher than it was in the past, for example, you see a dilutive impact on eBPU that what we saw on the fixed eBPU, for example, at the end of 2020 and in Q1 and Q2 of this year, because we... We had a step in terms of FTTH net ads in the middle of last year. You saw the results in EBTU, but it is not a bad news, I will say. We continue at the same time to work, so it's not the effect of promotions of the market, it's only the effect, the result of the fact that the French market is organized with First year, I would say, half prices, and after that, normal prices. And it's the same for everybody in the market. Iliad, Earth, SFR, and Orange. So in the field business, and either in the big part of the mobile business also. But it's not the effect of, I would say, marketing promotions or low pricing. or a level of competition. It is only the structure of the market. So, at the same time, we continue to increase IDPU for existing clients with our more formal strategy. Yet, we are working with clusters to monitor the level of churn and also because each cluster doesn't need the same I would say, in exchange of the price increase. Some clients would be happy, for example, with, I don't know, more Giga inside the bundle. Some others would be happy with a new service, for example, and some others with something else. And so that is what the marketing team is working on. is to decide what is the good service for these clients. And if the service is good for the clients, the clients will be happy to pay more for the service and won't charge. So this is why we are working with the risk cluster.

Thank you very much. Just to follow up on the 6th ADPU, indeed the promotions I'm mentioning are the first year promotions which lapsed in the second year and you have also an increase coming from that. My question, I guess, is with that mix, the first year promotion, which comes with the embarked base on the FTTH side and the back book price increases, do you see this mix bringing the fixed ADPU growth to a negative territory at some point or do you think that you will continue to print growth at the fixed ADPU on a quarterly basis or from here?

In the medium term, if you look at the medium term, of course, the EBPU will go up because at this moment, you have two effects. You have new clients which benefited from the low pricing during the first year, of course, but you have also existing clients, existing DSL clients, that we are migrating from DSL to FTTH. And for these clients, we offer them rebate during the first year. So for the moment, we have two negative effects, the new clients and the migration of existing clients. In the future, as everybody will be on FTTH, you will have only new clients. So in the future, of course, ABPU in the fixed business can only go up. And keep in mind also that ABPU types are higher than the SL1 for the normal level of types. So in the medium term, of course, ABPU will go up. Now, quarter after quarter for 2022 or Q4 2021, I don't know, because it will depend how good we are in taking new clients, how good we are to migrate new clients. It will depend on the seasonality. There are many things. So it is difficult for me to say to you, I'm sure that the fixed EBPU will increase the next quarter. I don't know. Probably yes, but it will depend on the volume.

Okay, that's helpful. Thank you.

The next question comes from the line of Nicola Gifford from Goldman Sachs. Please go ahead.

Thank you. I just had one follow-up on the impact of rising costs specifically for the telecoms business. Can you quantify the sensitivity or impact of inflating lease costs and energy costs specifically in the telco business? Thank you.

So about lease costs, we have no impact. We have only long-term contract, you know, now with Celnex, TGF, and so on. and these contracts are not linked with inflation rates. We have six incremental things for our list, so it is not linked with inflation at all. Regarding energy, we place We fixed the price of our energy from now to 2024. So we won't be impacted by any increase in terms of energy prices from now to 2024. And the cost of energy is quite low at Book Telecom. It's around 1% of the turnover now. So it's not as high as in other activities.

Great. Thank you.

The next question comes from the line of Nicolas Mora of Morgan Stanley. Please go ahead.

Yes, good morning, gentlemen. First question on Colas, please. The margin in the third quarter was maybe a little bit below what we would have expected after a very strong talk to the year. Colas seems in their price release to a slightly less favorable weather in the U.S. I mean, is there anything else? that you can pinpoint to in terms of margin, which was below 8% in Q3. And we've seen in 2018 or 2019, for example, that the margins could have gone up close to 9%. Second question is just on the order intake. And you're talking about the expectations of contracts coming through in Q4. I mean, we are halfway there. uh still not much announced can you help us understand a little bit where you expect what kind of large contracts you expect to be to be booked either at colas or reconstruction and last point on on big energy and services um a few years back you you gave a emerging target for this year at around three and a half percent i think we're we're we're gonna fall short of this but can you help us understand what we should expect from here i mean we are You said 2.4% SEBIT margin at nine months 21. What are the next milestones and step change in these margins into next year and 23 please?

Considering your last question, we mentioned for energy and services that we expect for the next year margin slightly above above 3% for 2022. Considering the reason of the... We're expecting an improvement in our margin for energy and services, and we confirm it. Now the pace of that improvement is notably related to the COVID crisis, which is not yet totally behind us. Your second question was related to a contract we are expecting in the future for COLAS. It's probably in the real activity that we will have some good news to announce in the next quarter related to that. And your first question was related to and the level of margin of Q3. You know, in our construction activities, you can monitor just for a quarter of your margin. We are aligned with the guidance we have issued related to the annual operating margin of COLAS slightly, which is increasing year after year. So we have said that we will be at a higher level than in 2019, and we confirmed that the guidance. But there is no specific event except the one which I mentioned in the Colas communication. That was during the U.S., for instance.

The next question comes from the line of Sam McHugh of Exxon BNP. Please go ahead.

Yeah, morning, guys. I think at the first time I've heard you mention the contingency provisions as one of the inflation protections. Could you give us a bit of a sense of how big these contingency provisions are relative to contract sizes? And then I'll average what percentage of the provisions you generally find you need to use each year, and then how much of the provisions... Sorry, go on.

Sorry, we want to communicate on how we price our contracts. It could depend on contract activities by activity. It's impossible to give you some flavor in that respect.

And is it possible to give a flavor of the proportion of contingencies that are being used up for inflation versus general use of these provisions? Any kind of color would be interesting, just because I haven't heard you talk about it before.

I'm sorry, but we are unable to use it. this information, which is confidential. Okay, thank you very much. What I can say is that there is no specific, we have no overconsumption of this contingency provision. Okay, great, thank you.

We currently have no more questions on the line. If you would like to ask a question, please press star one. There are no more questions on the line. I hand over to your host to conclude today's call.

Okay. Thank you for joining us today. We'll be announcing our full year 2021 sales and earnings on 24th of February 2022. Should you have any questions, please contact our investor relations team. Their contact information is on the pre-press release on our website. Thank you.

Ladies and gentlemen, this concludes the BUID 9-month 2021 results conference call. Thank you all for your participation. You may now disconnect.