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.