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.

Thank you, Christian. I would like to briefly comment on the financial statements on slide 23. We have already discussed nine months revenues on current operating profit at the beginning of this call. Other operating income and expenses were negative at 106 million euros in the first nine months. This amount includes non-current charges mainly related to our M&A projects. As a reminder, in nine months 2021, the other operating income and expenses were positive at 90 million euros. This amount included, in particular, non-current income of 107 million euros at Bouygues Telecom, mainly that Christian has already talked about. Regarding the share of net profit on joint ventures and associates level, I just want to remind you that Alstom is no longer contributing to our figures, contrary to last year. We will now turn our attention to the group financial structure. Moving to slide 24, net debt was 3.7 billion euros at the end of September 2022. Compared to end September last year, net debt was up 1 billion euros. Net gearing is at a low level of 27%. As such, the group benefits from a particularly strong financial position. Aside from the change in operations, and September 2022 net debt position was positively affected by the interest rate swap mark to market that I will explain to you later. Let's now turn to slide 25, to describe the net debt evolution between end of December 2021 and end of September 2022. Net debt increased by 2.7 billion euros since the end of last year. This change is mostly explained by the following items. First, acquisitions net of disposal totaling 140 million euros of which 130 million euros is the payment to Engie in connection with the signature of the share purchase agreement on 12th of May. Also included is the TF1 share buyback. Togon, weak share buyback for 183 million euros. Third, the payment of dividends totaling 776 million euros. Fourth, positive fair value adjustment on interest rate swaps contracted for the equance acquisition, totalling €935 million. And lastly, €2.6 billion from operations that I will comment in the next slide. Regarding the fair value adjustment on interest rate swaps, let me remind you that between November 2021 and January 2022, to be protected against interest rate increases, the group entered into pre-hedging contracts in view of refinancing the bond issue maturing in 2023, and the syndicated loan signed for the acquisition of Equance. At 30th of September 2022, The fair value of this pre-hedging swap totalled €931 million versus €38 million at the end of December 2021. The €931 million included the value of contingent swaps for €245 million locked in at the time of the bond issued on 17 May 2022. If we include the 42 million euros received as part of the May 2022 bond issues in respect of non-contingent swaps, the total impact of swaps over the period amounts to 973 million euros. I now suggest looking at the details on the change in operations on page 26. Turning to the breakdown of operations for the first nine months of 2022 on slide 26, you can observe that first, net cash flow, including lease expenses, remain comparable to last year. Second, net capex was up 272 million euros, largely due to higher growth CapEx and lower disposals at BRIC Telecom. As you know, the phasing of CapEx is not linear over the course of the year. And third, you can see on the chart that working capital requirements related to operating activities and others increased by 1.4 billion euros compared to the same period of last year. With a strong increase in activity in 2022, Mainly driven by inflation, some items like inventories and customer receivables have increased. As we do every year, we will manage this situation as much as we can by the end of the year. Furthermore, I remind you that we started 2022 with an optimized level of working capital related to operations by business segments. Moving to slide 27, I would like to share with you our decision to release a new financial indicator. As you may know, Equant's acquisition will lead to the recognition of an amortization of intangible assets, what is called an amortization of purchase price allocation. To provide an accurate view of the operational activity and performance of the Group and its business segments, we will implement a new financial indicator that will be the current operating profit before amortization of intangible assets recognized from acquisitions. This new indicator will be called the current operating profit from activities and will be implemented from the start of EQAM's PPA amortization or from 2023 financial year at the latest. Of course, we will continue to provide the current operating profit in our financial statement, but in our financial communication, we will replace current operating profit with current operating profit from activities, also called COPPA. Please note that end September 2022, this COPPA would amount to 1 billion 240 million euros before amortization of PPA at BRIC Telecom, Colas and TF1 for a total of 33 million euros. Lastly, on slide 28, I would like to add that from October 2022, Equance will be consolidated in Briggs Group's accounts with a new business segment. At the beginning of 2023, New Energies and Services will join this new business segment. Regarding Equance's contribution to Briggs non-financial performance, some data on human resources will be available and disclosed in the 2022 Universal Registration Document. The full non-financial data will be available in the 2023 Universal Registration Document. I will now conclude this presentation on slide 30. The 2022 Group Outlook is confirmed. In 2022, we expect a further increase in sales and current operating profit versus 2021. And after SBTI endorsement of COLA's greenhouse gas emission reduction targets in 2021, the other business segments are now aiming to receive SBTI endorsement for their own decarbonization targets. Lastly, we remain very vigilant regarding any changes in the macroeconomic situation and their direct or indirect consequences on the group's activities and results. Thank you for your attention, operator. Please open the floor for questions.

Thank you, Pascal. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. We'll now take our first question from Nicolas of HSBC. Your line is open. Please go ahead.

Oh, thank you. I'll start with some questions on free cash flow because we still have lower contributions here and there from Book Telecom and Colas. So if you could give us more color on the moving parts here and what the full year could look like. And obviously a follow-up question would be on the working cap because I understand you don't guide on this. But is it right to expect a big reversal in Q4 as we have seen in the previous years? And then I've got a second question on the BRIC energy and services, because you mentioned contract selectivity impacting revenue growth. But does it mean there is more price competition right now? Because this activity is often described as having some sort of pricing power. So if you could give us more indications, that would be great. Thank you.

Thank you. Okay. Hi, Nicolas. This is Christian. I will answer your free cash flow question on BookTelecom. The free cash flow for BookTelecom is around 200 million euros below the level it was last year. If you look at the three components, first, this is plus 100 million euros on EBITDA. Second, minus 150 million euros on CAPEX. And as we will have the same level of capex than last year at the end of this year, you can be sure that this figure will be zero at the end of the year. And second, around minus 170 million euros on disposals. And we will have less disposals than last year. So, of course, it will have a negative impact at the end of the year. But this is not, I would say, current free cash flow. It is only due to disposal of data centers.

For your first question, two parts, free cash flow and working capital retirement. For free cash flow, obviously we have at Colas and Bouygues Telecom a lower level of net cash flow during the first nine months and the reasons are fairly different for the two businesses. For Bouygues Telecom, Christian answered you. For Colas, we had a result which is under pressure during the first half of the year. We see at the end of September what we saw at the end of June with the pressure on net cash flow for Colas, but we will cover part of it during the fall. during the end of the year and for working capital requirements let's say that we started with a high point at the end of 2021 so it is normal in particular in construction to have a deterioration which is either cyclical and either starting from a high point. But it is fair to consider that during the last quarter of the year, we will recover an important part of this working capital deterioration. And now concerning big energy and services, I would like to say that it is fair to consider that the market is a growing market. In this market, Bouygues Energy and Services has decided to improve profitability. You have seen that year after year we are increasing the profitability of this business segment. For that, we prefer to have a lower level of growth and to improve profitability, and this is precisely what we see during the ninth first month of this year.

Okay, so if I understand, so it's more for the new contracts, but you don't see much pressure on the existing contracts when you... Frankly speaking, the demand remains strong because...

The environmental transition needs to develop the equipment in terms of energy and services. So the market is a strong market and the mega trend on this market is a growth. If you consider our competitors, they have some growth rates, which are quite significant. So the market is growing. So if we have decided to stabilize our turnover, it is to improve the profitability, which was expected. Understood. Thank you.

Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. We'll now move on to our next question from Nicholas Mora of Morgan Stanley. Your line is open. Please go ahead.

Yes, good morning. So first question on disposals. There have been a few articles in the press, especially on Bloomberg, that you were looking to dispose some specific business within Equance, some EV charging station business, some business in the UK as well. Do you see the opportunity in the short term to fine tune the scope of the Equance business? And what would that lead you to in terms of underlying margin for the remaining business within Equance? That would be helpful. That would be the first question. Second one is on Colas. So we understand you're dropping the guidance for the margin for next year. Can you help us understand a little bit the wiggle room on the margin? You will be below four, but will you be at three, three and a half? I mean, we're talking about the growth guidance on EBIT is not particularly challenging, but just trying to understand, to put a bit of color and granularity on where a suitable margin for collapse is in an infrastructure environment. Can we go back up to 3.4, 3.5?

that build up on that or is it going to still be challenging in the in the low three percent thank you um on uh sorry but for um two questions and answer it's a bit early for uh for for each of you i i will uh for for the first question considering uh it's uh We know perfectly that when Engie decided to constitute the equance perimeter, they decided to sell subsidiaries where the asset-light activities were in majority. So that means that in certain circumstances, there are some asset-based activities in the equants perimeter and we will consider how to sell it. It's quite too early to say what will be the calendar and what will be the amount. We don't see any major impact on profitability for the moment, but it's very early to speak about that. We have promised you to to have a capital market at the beginning of next year. We will discuss that in due time. Concerning COLAS, as you have understood, our margin rate is under pressure because our turnover is increasing due to inflation over inflation in certain perimeters. I mean, for instance, North America or countries just around Ukraine. And for this reason, it's very difficult to know what will be our turnover because it will depend on what will be inflation in those countries. during the next year for 2023. And frankly speaking, no specific guidance from anyone on that respect. So it's very difficult to know what will be our turnover. So as we don't know, we know that it will increase. certainly globally, but we don't know in what extent it will be. And for this reason, it is very difficult to know what will be the turnover of Colas. And you have seen that during the nine first months of 2022, we have a very important increase. The part which is related to inflation is major. This is the reason why we prefer to guide not on the margin rate but on the figure of current operating profit. This is the reason why we have said to the market For 2022, we expect an increase compared to 2021. And for 2023, we expect an increase compared to this year. And it's too early to give you any further information in that respect.

OK, understood. But if I may comment just on Colas. When we look a bit at the profitability, the building blocks, for example, in the first half, you got hit on the spike in raw materials. You had signed contracts on lower raw materials assumptions. Then you've got the higher bitumen costs. That clearly has an impact on margin. But getting into 2023, at least one of these two elements should go, which is, let's say, the the margin losses in North America. Is that enough to bring basically margins in the higher end of the 3% to 4% range or not enough? We're just trying to understand basically if there's anything else struggling within Colas, if it's potentially Colas Rail which has been struggling or if it's just really an inflation issue.

We have essentially an inflation issue.

Thank you. We'll move on to our next question from Matthew of Barclays. Your line is open. Please go ahead.

Yes, good morning, and thank you for the presentation. The first question was on the telco market competitive environment. Different players have characterized the competitive environment differently over the past few weeks, so it would be great to hear how you view the competitive environment today and what you expect. The second question was about the order book at the pure construction business. which remains kind of flattish, and I don't know if you can add a bit of color there. Are you being more selective, or is it just the market trends? And lastly, on Equance, I understand that until now you did not communicate about the numbers that Equance was publishing because you did not own it. But now that you own it, can you give us a sense as to how the COP, current operating profit, developed throughout 2022. Thank you.

First, on the telecom business, in the mobile, I remind you that the market is still growing, and this quarter we observed less aggressive promotional offers compared especially to last year, and we also observed also a trend of increasing types in the mobile business, especially for the low-end part of the market. In the fixed business, thanks to FTTH, we had 18 very dynamic months boosted by the pandemic effect, and now the market is returning to a more normal volume growth level as before COVID. And about Thais, we also saw slightly growing in the fixed business. In the medium term, I would say that we think that as the customer's need for connectivity remains high and data usage will continue to increase, we will have the opportunity to continue to increase tariff and revenue. The cost side, we need also to have the opportunity to increase prices, but we also need to do that because the cost of the network will increase with more sites and so more technology, more higher energy costs in the medium term and so on. And so that's why we will continue and we need to pursue our more formal strategy.

A further question related to equance. In fact, I remind you that the closing took place a month ago. So in one month, we didn't have the time to analyze equance figures because we have to understand what in the equance performance is related to the constitution of the equance perimeter and what are the results. and to compare it with the methodology which are equivalent to ours. So it's too early. We'll give you all Equant's data set when we will do the capital market day beginning of next year. As far as the order book is concerned for big construction, the order book is effectively flattish in the context where, you know, the order book of construction is always variable when we have very important contracts which are signed. During the period we didn't have any contract of that kind except for the Quai des Vernes project I mentioned I mentioned in Switzerland. And so we are quite confident with our level of activity at brick construction level. We see that our 2023 activity is covered in a ratio which is very satisfactory compared to the previous years.

Okay, thank you very much. Thank you. Once again, ladies and gentlemen, if you would like to ask questions, please press star 1 on your telephone keypad. We'll now move on to our next question from Virginia at Odo. Your line is open. Please go ahead.

Hi. I'm Virginia Russo from Odo BHS. Thanks for taking my questions. I have two of them. First, on inflation, could you update us on the inflation you expect for 2023 in terms of energy, but also in terms of salaries? And follow-up questions on construction and demand in construction. We begin to see some comments from associations, etc., stating that local authorities in France are looking carefully at their spending budget and that demand for construction could be impacted. Do you already notice anything in that field, or do you continue to see a quite solid trend? Thank you for your answer.

As far as your first question is concerning inflation, precisely, we don't, and this is at the heart of my answer concerning our guidance for Colas, we precisely don't know what will be the inflation next year. And this is precisely the reason why it's very difficult to know what will be our margin rate next year. And we prefer to guide saying that the Colas margin will be will be increasing, the COLAS result, current operating profit will increase next year. So we didn't guide, this part of the uncertainty I was mentioning previously. As far as construction demand, for the moment we don't see any movement in that respect either at COLAS or reconstruction level in France for instance. It doesn't mean that it will not happen, but we have a very important order book, so we will see that. If this event occurs, we will have the ability to adapt our structure, but it's not the case at the moment.

Thank you. We'll now move on to our next question from Nicholas, again, at HSBC. Your line is open. Please go ahead.

Thank you. Short question on the construction activity, especially the UK, because it's probably one of the most challenging markets at present. So I wonder what is your activity doing in the UK? I wonder if you're able to manage your margin, and can you afford to be selective in such a market? And the reason I'm asking this question is, to see if the UK could give an indication of what could happen to your business in other countries if the macro trends were to deteriorate further. Thank you.

As far as our construction business is concerned in the UK, let's say we have some long-term contracts which are... which allows us to obtain a certain level of activity. I mean, for instance, our Inclect Point project where, first, it is a long-term contract, and secondly, we are on a cost plus fee basis. impacted by the inflation which is very important and we have the ability to pay what we need in order to have people to do the work So, obviously, margin is under pressure in the UK, but we don't see an important movement in terms of volume in the next year. Okay. Thank you.

Thank you. We'll now take our next question from Nuno of Societe Generale. Your line is open. Please go ahead.

Thank you. Good morning. I hope you can hear me well. I have two quick questions. One was on Buick Telecom. In the press release, you mentioned that other sales have risen 12% year-on-year, and they've been driven mainly by the built-to-suit sales of towers. So I was wondering if the sales of towers are contributing to your EBITDA margin, and if so, if you could let us know what has been the EBITDA growth over the nine months excluding these Then a question on equines. I'm sorry to go back on equines. You've mentioned that you're probably saving this information for the capital markets. I was wondering from a perspective of integration costs, because the last time we spoke on equines, you mentioned they would have about 150 million CapEx costs for IT systems migration and some 60 million OPEC costs for integration. Are you still seeing these sort of short-term costs in terms of integration, or is this slightly changed? And a final point, you also mentioned at the time that the latest contracts signed on equines over the last 18 months had margins of 4%. Is that still true, or have these margins fallen a little bit? Thank you.

First, on telecommunication, the growth in other cells, up 12% year on year, is notably coming from Samalo project, which is not to our cause, but more... you know, the fiber to the office and fiber to the antenna network that we are holding out with Celnex. This is a big project, around 1 billion euros spread over six or seven years, and we did more work on this project this year than last year. The margin of this project is very, very small, and so there is no impact on BDS.

As far as your question concerning equants, first, I don't remember we have said that the order book was at 4%. One thing is sure, Jérôme Stübler and Pierre Van Stoflegat have a policy to increase margin in the order book. So they are increasing this margin gradually. but I don't recognize your 4% figure. As far as CAPEX concerning integration, part of this CAPEX were related to equants and related to what they have to do in order to constitute equants. As you may remember, equants are constituted by subsidiaries which were split in the energy organization and they have to build an IT system and this process is already already started and this is the reason why it's partly integrated in the figures we have given to you concerning the impact of the IQANCE acquisition on BRICS debt. So I mean included in the 6.5 billion euros impact on BRICS debt. But for more detail, I would suggest to wait on the capital market. They will have a beginning of next year.

Yes, of course. Thank you for the detail.

Thank you. We'll now move on to our next question from Jerry Dulles at Jefferies. Your line is open. Please go ahead.

Yes, good morning. Thank you for the presentation. I've got three questions, please. Firstly, in relation to WE telecom, Christian, I was wondering if you could indicate to us how important the effect of back book repricing has been so far and whether you feel sufficiently confident about the scope for continued price increases to formalize it within customer contracts as we have seen in some other markets. My second question, please, is related to the COLAS margin guidance today. When wholesale gas prices started to increase this time last year, you explained to us that COLAS is characterized by short cycle contracts, making it easier to pass cost inflation through to customers. So I'm simply sort of interested in what's changed on that front now. And then finally, in relation to equants, You mentioned that there will be disclosure in the 2022 registration document. I just wanted to clarify, will we be getting pro forma equants financials for 2021 in the 2022 registration document and at the Capital Markets Day? Thank you.

First on telecommunication, you're right. Back-book pricing is a big part of the growth in revenue built to customers. We are very confident to our ability to continue this strategy for three reasons, I will say. First, as I said before, the customer's need for connectivity remains high and data usage continues to increase. First, the fact that we observe the trend of increasing ties in the mobile for new customers, especially in the low-end market. It helps, of course, to continue to increase ties also for the existing customers. Because when you have, for example, an offer at 12 euros and the lowest offer on the market is at 15 or 16, you cannot change the price for the existing customer and he has no choice to find another at the same price. So he will stay with you. And third point, inflation is also a help for us to continue TICE because the customers now understand that prices in telecommutation but also in energy and other things of course are increasing and so it is good for us and it will help us to continue to increase TICE.

As far as your question concerning COLAS, let's say that when we have seen the inflation impact during the beginning of this year, we have asked people to adapt and not speculate. So let's say that probably we have more accurate indexation formulas, we have more accurate contracts in order to transfer that risk to our clients, but we couldn't expect any extra margin related to the fact that energy costs could decrease, if I've properly understood your question. For equants, we will provide some proforma figures for the entire 2022 year, which is already not an easy thing to do, because I remind you that the perimeter has been finally constituted end of June this year, the equants perimeter. So we will give you some 2022 pro forma figures, but not, I don't think so, 2021 figures. Too complicated to organize and to make sure that figures are comparable.

Thank you. Could I just follow up on that? In relation to equants, presumably when you were doing due diligence prior to making an offer, you had visibility on what numbers look like. So I'm just interested in why it is so hard to constitute the backward-looking perimeter.

Because we have aggregated figures and not consolidated figures.

Fair enough. Thank you very much.

Thank you. Now we'll take the last question of Eric Reverie of CIC. Your line is open. Please go ahead.

Good morning. Three questions from my side. First one is on brick construction EBITDA figures. So if you look at the nine-month figures, the EBITDA is decreasing by 45%. while the operating profit is increasing by 13%, so I would like to understand this big difference. And if you look at free cash flow, it is increasing for reconstruction over nine months, so a big loss on those figures for EBITDA. Second question is on BRIC Telecom. Could you give us some visibility on the energy costs for next year and give us the support also energy costs which are edged for 2023 and based on this edging one kind of increase you expect for energy cost in with Telecom for next year. And last question is on energy and services. Could we have the nine months revenue figure please?

Yes, so for energy for BoucTelecom, I even knew that we are totally edged until the end of 2024, so they will have no impact coming from energy costs on the BoucTelecom results for 2023 and 2024. And we are now working on 2025 energy edging position.

For the energy and services revenue for the 9th month of 2022, it is €2,818,000,000, which represents a decrease of 1.5%. This is stable if you exclude the fact that we have transferred a few activities from energy and services to building and civil works. This is for the first question. The second question was related to EBITDA. Generally speaking in terms of construction there is no reason to... EBITDA is not an indicator because the result is done with contingencies and provisions which are fluctuating but there is no reason to integrate this indicator. The proper indicator which is relevant for construction is EBIT. So there are some movements of provision due to the fact that we anticipate some expenses at one time and when we spend the money which was anticipated, we have the EBITDA decreasing. So there is no real impact on the global performance of this activity.

Thank you. There are no further questions in queue, so I will now hand you back to your host, Parthiv Ranje, to conclude today's conference. Thank you.

Thank you for joining us today. We'll be announcing full year 2022 results on 33rd of February next year. Should you have any questions, please contact our investor relations team. Their contact information is on the press release and on our website. Thank you for your attention.

Thank you all. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.