Bouygues

hello and welcome to the big ninth month 2022 results call my name is laura and i will be your coordinator for today's event please note this call is being recorded and for the duration of the call your lines will be on listen only however you will have the opportunity to ask questions at the end of the call this can be done by pressing star 1 on your telephone keypad to register your question if you require assistance at any point Please press star zero and you will be connected to an operator. I will now hand you over to your host, Pascal Goulanger, Deputy CEO and CFO of Bouygues, to begin today's conference. Thank you.

Good morning to all of you and thank you for joining us to discuss Bouygues' nine-month 2022 results. With me in the room are Christian Lecoq, CFO of Bouygues Telecom, and Armel Gaby, Head of Investor Relations. Following our presentation, we'll be answering your questions. Let's start with a few recent highlights on slide four. On the 4th of October, we completed the acquisition of Equance, a key milestone in the history of Bouygues. This acquisition closed after we obtained all necessary authorizations under competition and foreign investment laws. Please note that we had already fulfilled the European Commission requirements with the disposal of Colas High Belgium on 30th of September 2022. The acquisition of Equance is a very significant move in the promising energies and services market. BRIC becomes a world leader in the multi-technical services market, which is at the heart of the environmental, industrial, and digital transitions. More specifically, these services offer solutions to optimize energy consumption, a key strategic issue in the current environment. This new business segment, which combines both Equance and Bouygues Energy and Services, becomes the largest business segment of the group. Based on 2021 figures, it generates around 17 billion euros in sales, employs around 97,000 people in over 20 countries, and enjoys increased capacity to design and run out innovative, and sustainable solutions and services. I would like to remind you that Bouygues has acquired 100% of the shares of Equance for the final price of 6.1 billion euros. Equance net debt at the acquisition date was estimated at 0.4 billion euros below the November 2021 estimate. Therefore, The total impact of this acquisition on the group's net debt was assessed at 6.5 billion euros, of which 130 million euros had been paid to Engie on 12th of May 2022, open signature of the share purchase agreement. On slide five, you can see that the Tukaser integration process started from day one with a global internal communication campaign. On 18th of October, Equant's top managers met Bouygues' top managers at Bouygues headquarters. The CEOs of each business segment presented their strategy. Immediately after closing, we started the integration process of the Equants and Bouygues Energy and Services team. A first executive committee meeting took place on 7th of October. A two-day workshop was also organized, bringing together the top 120 managers from both business segments to draft an action plan. Jerome Stubler, CEO of Equance, and Pierre Van Stoflegat, CEO of Bouygues Energies and Services, held eight live chats with staff around the world. Subsequently, Jérôme Stöbler began his world tour to personally meet the teams. As already described, since the signing of the agreement with Engie in November 2021, everything that could be done within the regulatory constraints have been done in order to move forward faster once the closing was complete. Therefore, from day one, Workstreams between BrickEnergies and services and Aequan started by analyzing business segment development, procurement, IT, finance, HR, etc. We were able to start the first actions very quickly, especially the one dedicated to procurement. Indeed, procurement is a key area to improve performance through initiatives such as the alignment of commercial conditions and renegotiation, catalogue implementations and bulk purchasing. In France, the process already started with the first set of tangible results expected by end 2022. Other countries have started their review and first actions will begin soon. As explained on slide six, on 24th of October, Bouygues completed a new major milestone in refinancing the two-year syndicated loan used for the acquisition of Equance. Indeed, Bouygues successfully completed a bond issue totaling 2.25 billion euros in two separate tranches. The first tranche of 1.25 billion euros for 10 years has a coupon of 4.625%. The economic cost for the group after factoring in pre-hedging amounts to slightly below 2.05%. The second tranche of 1 billion euros for 20 years has a coupon of 5.375%. The economic cost for the group after factoring in pre-hedging amounts to slightly below 3.15%. The strong demand for this issue from bond investors confirms the market's confidence in the group's creditworthiness. Bouygues' credit rating is A3 with stable outlook with Moody's and A- with a credit watch negative with Standard & Poor's. Therefore, overall, Briggs had already secured the financing of most of the equance acquisition. Since May 2022, Briggs issued a total of 4.25 billion euros of bonds for an average economic cost of around 2%. Besides this, 869 million euros were received upon the settlement of pre-hedging instruments associated with those 4.25 billion euros. Lastly, we still have some pre-hedging instruments available to cover 700 million euros dedicated for future financing. The fair value of these instruments amounts to 130 million euros as of 15th of November 2022. Let's now turn to the Group 9 key figures on slide 7. The group demonstrated once again its resilience in a difficult environment and confirms its 2022 outlook. The strong backlog in the construction and services businesses offers us good visibility on activity. Total group sales were up 8% in the first nine months 2022. Sales were up in almost all business segments and were notably very strong at Colas. Like for like and at constant exchange rate, group sales increased by 4%. The nine months 2022 current operating profit increased by 66 million euros compared to nine months 2021. And the current operating margin reached 4.1% a stable and robust level compared to the level of first nine months 2021. Brick Construction, TF1 and Brick Telecom improved their profitability compared to last year. As already explained, inflation has a derivative effect on COLA's margin and we will detail this later in the presentation. Net profit attributable to the group was 537 million euros. Here, I would like to outline two things. First, Alstom no longer contributes to this number, while the first nine months of 2021 included a positive contribution from Alstom of 290 million euros. Second, this figure includes net non-current charges to of 106 million euros mainly related to the two major M&A projects we managed this year and therefore is not representative of our business. In comparison, the first nine months of 2021 net profit attributable to the group included 19 million euros of net non-current income essentially related to capital gains linked to the disposal of data centers at Bouygues Telecom. I would like to reaffirm the group's commitment to its employees. People have already been at the heart of the Bouygues group. They are our greatest resource, and their expertise and dedication drive our performance. Considering the challenges of the current environment, Bouygues has decided to act in favor of the lowest earning employees in its business segments, both in France and abroad, in order to ease the impact of inflation on the cost of living of its employees. In France, in addition to the annual pay review, several increases in wages have been undertaken in the past 12 months. December 2021, March 2022, and September 2022. Furthermore, Bouygues has decided to pay a special one-off bonus to its employees. This bonus is paid to more than 36,000 employees earning less than twice the annual French minimum wage. It represents an amount of around 25 million euros recorded in current charges and impacting current operating profits. In the international businesses, measures have been taken case by case and based on the local context, especially in countries experiencing extremely high inflation. Let's now turn to the review of operations on slide 12. Let's begin with the backlog in the construction and services businesses. The overall backlog at 8 September 2022 was at a high level of €34.2 billion, up 7% year on year. This increase in the backlog was driven by collapse. Brick construction backlog was nearly stable at €20.2 billion, offering a good visibility on future activity, with order intake up 9%, of which international markets were up 12%. This momentum was driven by both a normal course of business and the large 475 million euro contract won in Switzerland in Q3. Colas backlog was up 30% and up 90% at constant exchange rate and excluding principal disposals and acquisitions. The order intake of Colas increased by 28%. Colas achieved a good commercial performance in roads activity, particularly in North America and Europe. This was also enhanced by inflation. Furthermore, Colas Rail continued its positive momentum with the award of a new contract for the Birmingham tram line in the UK in Q3 for 192 million euros. This comes after large contracts were already awarded in Q1 and Q2. At Bouygues Immobilier, the general market conditions in housing are tightening. We continue to see a catch-up in building permit issuance in the residential property market compared to the first nine months of 2021. However, we observe longer timetables for negotiating construction work standards due to inflation and such delays impact inventory of housing units available for sale, the level of reservations, and the backlog. Conversely, clients in commercial activity are still in a wait-and-see mode. As a result, Bouygues Immobilier's backlog was down 16% year on year. Let's now look at the construction and services activities key figures on slide 13. The construction and services businesses recorded solid figures. Sales were up 9% year-on-year and 4% like-for-like and at constant exchange rates. First, at brick construction, sales were up 3% in building and civil works. They were slightly down in energies and services, but they were stable, excluding activities transferred to the building and civil works segments. Also, please keep in mind that energies and services sales growth is impacted by contract selectivity. Second, at Bouygues Immobilier, sales were down 5% due to a low inventory of housing units for sale. One main commercial project was sold in Q3 2022. And third, at Colas Level, Sales were up by 18% driven by Colas international sales, which were up 30%, led by North America, as well as Europe. Of note, in the nine months, Destia contributed 430 million euros to Colas sales. Current operating profit of the construction and services businesses reached 517 million euros stable compared to the same period of 2021. First, BRIC construction margin improved by 3% versus 2.7% in nine months 2021. This was mainly led by BRIC Energy and Services, whose current operating margin reached 3.2% in nine months 2022. Building and civilian has also slightly improved to 2.9%. Second, the current operating result of Bouygues Immobilier reflects the low level of activity in residential property market and the limited interest for customers for commercial property. And third, in Q3 2022, Colas had 373 million euros in current operating profit above the third quarter of 2021, helping the 9 months current operating profit and current operating margin to catch up compared to the situation in H1 2022. Nonetheless, inflation still has a dilutive effect on margin. As already explained several times, inflation has a deutive impact on Colas' current operating margin. Therefore, Colas decided to replace its 2023 guidance. Sales in 2022 will be significantly higher than in 2021, boost by the contribution of Destia, higher unit prices for products and services sold by Colas, against a very inflationary economic magnum and an exaggerate effect caused by Euro to US dollar variations. In a complex environment like this, Colas has put in place action plans to offset the impact of cost increases and safeguard its financial performance. Colas expects its 2022 current operating profit to be higher than in 2021. Given the inflationary environment, particularly in countries bordering Ukraine, and its direct impact on the current operating margin, especially in the bitumen trading business, it is no longer relevant to set profitability targets for 2023 in terms of the current operating margin rate. For this reason, Collas is replacing its target of 4% current operating margin in 2023 with a target for an increase in 2023 current operating profit compared to 2022. Nonetheless, thanks to buoyant fundamentals and the positive impact of a series of transformation projects that have been undertaken, Collas is confident in its ability to reach, going forward, current operating margin rate target it sets. Turning to slide 16, let's talk briefly about TF1's results, which were released at the end of October. First, TF1 had a good set of results. The 5% sales increase was particularly driven by NUEN. Revenues for the media segments were up 1% year-on-year, with advertising revenue down 2%. This was due to a strong basis of comparison after a solid growth both in Q3 2020, post-COVID, and Q3 2021, with a broadcast of the Men's Football Euro Cup. Furthermore, Nguyen Studios posted revenues up 35% for the first nine months of 2022 with an excellent performance in Q3 led by the delivery of programs. Nguyen also benefited from the contribution of studios acquired in Spain and Germany in 2021. Current operating profit showed improvement reaching 239 million euros in the first nine months. Cost of programs remained under control in the mega segment and demonstrated the ability of the business to monitor spending and achieve savings when necessary. Nguyen reported current operating profit slightly up on margin at 10.1%, taking into account the cost related to the end of broadcasting the Daily Soap pre-bail levy. As a result, TF1's current operating margin reached 13.7% and was up 0.2 points versus end of September 2021. On 27th of October, TF1 announced that the board of TF1 appointed Rodolphe Belmer as CEO and Gilles Pellisson as chairman of the board of directors. With a solid track record at the head of several leading French multinationals and a strong experience in media and streaming, Rodolphe Belmer is ideally prepared to meet the challenges faced by TF1 and well positioned to steer the long-term development of the TF1 group. To conclude with TF1 on slide 17, I will be brief as the TF1 team already commented on its 2022 outlook. TF1 needs to accelerate its transformation to meet changing consumption needs. It also must develop partnerships with platforms and continue to its expansion in the buoyant markets. I now leave the floor to Christian Lecoq for Brick Telecom performance.

Thank you Pascal and good morning everyone. Before discussing figures, I would like to say a few words on our Donate a Gigabyte campaign. As a committed operator and citizen, Brick Telecom has teamed up with four associations for the Donate a Gigabyte campaign. Everyone can give one symbolic gigabyte to support one of these associations. BookTelecom converts collected gigabytes into mobile plans and smartphones given to associations, which distribute them to disadvantaged beneficiaries. This is the second edition of this operation, and through it, We want to raise awareness among our employees and our customers to act against digital vulnerability and exclusion. On slide 19, I would also like to highlight some successes that demonstrate Blue Telecom's excellence in quality networks. First, the RCEP survey, published in October 2022, recognized once again the quality of our mobile network. Book Telecom has been recognized as second operator for nine years in a row, number one or number one execu in voice in subways, and number one execu in voice and text in the trade and cellular. Second, we entered in two major projects in B2B in the last few months. The first one is with the French Interior Ministry, where we will contribute to the modernization of the national communication system for the police, military police, fire departments, and emergency services system. It shows that Book Telecom is recognized for the quality of its network and its ability to innovate. The second one, named NumSpot, is an alliance for the development of a reliable cloud computing service. This new cloud will offer the highest market standards and is an answer to market challenges of data sovereignty. security of digital architectures, and data portability. Let's now have a look at figures on slide 20. Once again, you can see that commercial performance in mobile and fixed was solid in the first nine months. At September 2022, Book Telecom had 15.1 million mobile plan customers, including M2M. Commercial activity remained dynamic during the quarter, as Boot Telecom won 175,000 new customers in Q3 and 368,000 new customers in the beginning of the year. Now, let us turn our attention to our fixed customer base. As you can see on the right side of the slide, we had 4.6 million fixed customers at the end of September 2022. FTTH continued to expand strong growth with 157,000 net ads during the third quarter and 473,000 net ads since the beginning of the year. With a total of 2.8 million subscribers, FTTH customers represented over 60% of our fixed customer base compared to 48% one year ago. Having already more than 28 million FTTH promises marketed, we are ahead of our schedule to reach our target of 35 million by 2026. Let's have a look at key figures on slide 21. First, we achieved good performance both in volume and in value over the past 12 months, leading to a 6% growth in sales bill to customers. Mobile eBPU, now including BTBD and restated for booming impact, was up €0.3 year-on-year at €20.1, and fixed eBPU was up €1 year-on-year at €29. This good performance was partially offset by the continued decrease in incoming sales, leading to a 3% increase in sales from services. Other sales were up 12%, notably led by built-to-shoot revenues. EBITDA, after leases, grew by 9% in 9 months 2022 and reached 1,308,000,000 euros. Consequently, the margin improved compared to last year, which is consistent with our goal to progressively increase it. The current operating profit of 500 million euros was higher than in 9 months of 2021. Operating profit was 507 million euros and takes into account a non-current income of 7 million euros mainly due to the gain on the disposal of data centers. Please note that 9 months 2021 non-current income was 107 million euros also mainly related to the disposal of data centers. Last, you can notice that growth cap reached 1 billion and 232 million euros in nine months 2022, a higher level than in nine months 2021. The investments were also lower than one year ago. We are on the way to achieve all of our 2022 targets, including our growth cap and guidance of 1.5 billion euros, excluding frequencies. And now Pascal, I am giving you back the floor.