Bouygues

Good day, ladies and gentlemen, and welcome to the big conference call. For your information, this conference is being recorded. Please be aware that your lines are in listen-only mode. However, at the end of the presentation, the lines should be open for questions. We'll then provide instructions on procedures to follow if you'd like to ask a question. If you have any difficulty hearing the conference, please press the star zero on your telephone keypad for operator assistance. I'd like to turn the call over to Mr. Pascal Hélanger, Deputy CEO and CFO of Buick. Please go ahead, sir.

Good morning, everyone, and thank you for joining us to discuss Buick's first quarter 2020. Sorry. Is it okay?

Yes, please go ahead, sir.

Okay. With me today are Christian Lecoq, CFO of Buick Telecom, and Armel Garry, Head of Investor Relations. Following our presentation, we will be answering your questions. Let's start with our key messages on slide four. First, let me remind you that, like every year, and notably due to the seasonality of our activities, especially at co-last level, Q1 earnings are not indicative of half-year and full-year results. That said, group sales were up 46% in the first quarter of 2023, compared to the first quarter 2022. This increase was mainly driven by the contribution of Equance, which was acquired in October 2022, but also reflects a solid performance from our business segments, as well as inflation. Like for like, on that constant exchange rate, group sales increased by 4%. The group COPPA in the first quarter of 2023 increased by 75 million euros compared to the first quarter of 2022 and reached 9 million euros. As such, the margin from activities was a positive 0.1% an improvement versus first quarter of 2022. Net loss attributable to the group was minus 134 million euros a level comparable to Q1 2022. I will provide you more details about it later during this call. Last, net debt was 8.8 billion euros compared to 7.4 billion euros at end 2022, a usual increase due to the seasonality of activities. Let's now turn to the review of operations on slide seven. Let's begin with the backlog in the construction businesses. As a reminder, from January 2023, BRIC energies and services backlog is no longer included in the construction businesses backlog, as it is now included in the equance backlog. To facilitate comparison and analysis, we have highlighted in gray color the impact of big energy and services backlog in the previous years. The backlog at end March 2023 was at the high level of 29.4 billion euros, up 6% year on year, excluding big energies and services backlog from end March 2022 figures. The increase in the backlog was driven by both big construction and collapse. Looking at backlog for each business segment on slide 8, brick construction backlog, excluding brick energy and services, increased by 8% to 15 billion euros, offering good visibility on future activity. Order intake was up 57% in France and 127% outside of France. This momentum was driven by both the normal course of business and large contracts, of which around €350 million for the Toulouse Metro, around €770 million for the Abidjan Metro in Ivory Coast, one hospital in the UK for around €330 million, and one hospital in Morocco for around €130 million. At Bouygues Immobilier, the general market conditions remain challenging. Due to inflation, rising interest rates and difficulty to obtain loans, we continue to see a global wait-and-see mode from both residential and commercial property customers. Therefore, to adapt to the general context, we postponed the launch of some contracts which waited on supply and reservations. As a result, Bouygues Immobilier's backlog was down 20% year on year. Just a few words to say that we recently got positive news on the Vivaldi commercial project near Paris related to the withdrawal of appeals. This project should contribute to revenues in the coming years. We will provide more details in the coming months once the project is fully launched. Last, Colas backlog was up 8%. The order intake increased by 17%. Colas achieved a good commercial performance in rail activities, notably with a significant order for the Abidjan Metro in Ivory Coast. Furthermore, Colas roads continued its positive momentum with good commercial performances in North America and in France. These performances were partially offset by Europe, Middle East, Africa. Let's now look at the construction activities key figures on slide 9. The construction business recorded figures which, like every year, due to seasonality, are not indicative of the first half and the full year results. To facilitate comparison and analysis, we have excluded brick energy and services from the first quarter 2022 figures. Sales were up 5% year-on-year and also 5% like-for-like and at constant exchange rates. First, brick construction sales were up 6% driven by international building and to a lesser extent by civil works. Second, at Bouygues Immobilier, sales, including share of co-promotions, were down 15%, impacted by the wait-and-see mode of both residential and commercial property customers, as mentioned earlier. And third, at Colas, sales were up 9%, of which international sales up 14%. Revenue benefited partially from inflation, which accelerated since March 2022, and therefore first quarter 2022 results were not fully reflecting the new pricing environment. Current operating loss from activities of the construction businesses of minus 243 million euros was very similar to Q1 2022. First, COPPA at Bouygues Construction was stable compared to Q1 2022. Second, COPPA at Bouygues Immobilier, including share of copromotions, stood at 7 million euros. And third, in Q1 2023, as usual, Colas had a non-representative minus 301 million euros, 10 million euros below Q1 2022. The effects of the action plans implemented during 2022 to cope with inflation continued to bear fruit. However, the effects were mitigated by the sale of the underperforming subsidiary Brandscom in the United States as part of COLA's rationalization of activities. Let's now turn to the review of operations from Equance on slide 11. As a reminder, starting from January 2023, Aequan's figures include those of Bouygues Energy and Services. The figures reported for the first quarter of 2022 include only those of Bouygues Energy and Services as Aequan's Q1 2022 pro forma figures are not available. Therefore, Q1 2023 constitutes the first quarter combining the two entities. The integration is on track with new organizations in place in the main countries and the PERFORM plan launched in most business units. Equan's commercial activity was solid. The backlog stood at 26.7 billion euros, up 3% compared to end December 2022 figures, including BRIC Energies and Services backlog for 6.5 billion euros. This backlog offers a good visibility on the future activities. To be noticed that the Equance backlog, excluding BRIC Energy and Services at end December 2022, was adjusted from 18.7 billion euros to 19.5 billion euros following the standardization of the calculation methods for multi-year contracts in Belgium. As such, Equant's backlog, including brick energy and services at end 2022, stood at 25.9 billion euros. One last important comment on Equant's commercial activity The underlying margin of the order intake improved, highlighting the first positive impacts of the PERFORM plan. Equant's contribution to the group revenue on COPPA represented respectively €4.4 billion and €98 million, with a 2.2% COPPA margin due notably to seasonality. Don't forget that the BRIC energy and services integration in AQUANCE occurred very recently in January 2023, and that a new performance plan has just been launched. This performance is therefore in line with our expectations. To end with AQUANCE on slide 12, let me just add that 2023 guidance are confirmed with equants aiming for a slight increase in sales as a result of its selective approach strategy, a corporate margin between 2.5% and 3%, and a cash conversion rate before working capital requirement of between 80% and 100%. Turning to slide 14, let's talk briefly about TF1's results which were released on the 27th of April. First, TF1 demonstrated its ability to adapt to the general environment by controlling costs while maintaining good audiences within its main targets. In the first quarter of 2023, as anticipated, sales were down. They decreased by 14% with media sales down 14%, and new WEN Studio sales down 20%. Regarding media sales, as already explained by TF1, half of the decrease was due to a scope effect linked to the deconsolidation of Unify in fourth quarter 2022. Advertising revenue was down 10% and down 7% on a like-for-like basis, reflecting unusual macro uncertainties and sector-specific tensions, for instance, in retail, food, or finance. UN Studios posted revenues down 20% due to her high basis of comparison with one main program, which had been delivered in first quarter 2022. Costs of program were 201 million euros versus 220 million euros in first quarter 2022, largely mitigating the decrease in advertising revenue. On the other side, UN Studio low level of activity and IT expenses related to the digital acceleration plan impacted COPPA on COPPA margin. Turning to slide 15, I will end on TF1 by saying that, within a market offering a low visibility, the TF1 group will maintain in the media operating segment its agility in programming costs while offering a differentiating and event-driven lineup. After delivering numerous projects in 2022, Neuron Studios will draw on the diversity of its talent pool to develop new growth-driving projects for the years ahead. As such, 2023 outlook is confirmed. The TF1 Group will cement its leadership position and maintain a broadly stable current operating margin of activities. and it will continue to generate cash flow in order to aim for a growing or at least stable dividend policy over the next few years. I now turn the call to Christian Lecoq for BRICS Telecom performance.

Thank you Pascal and good morning to everyone. Turning to slide 17, let's begin with the commercial performance in mobile and fixed. At end March 2023, Brooks Telecom had 15.2 million mobile plan customers, including M2M, thanks to 27,000 new customers in Q1. As you can see on the right side of the slide, we had 4.7 million fixed customers at end-March 2023. FTTH continued to experience strong growth, with 148,000 new customers joining us during the first quarter. With a total of 3.1 million subscribers, FTTH customers represented 67% of our fixed customer base, up from 55% one year ago. With 31 million FTTH premises marketed, we are ahead of our schedule to reach our target of 35 million premises by 2026. Let's have a look at the key figures on slide 18. First, we achieved 6% growth in sales bills to customers. Mobile eBPU was up €0.2 year-on-year at €19.7 and fixed eBPU was up €1.7 year-on-year at €30.3. As for the mass market, roaming has returned to its pre-COVID level. we no longer reset our mobile eBPU for roaming impact. This performance was still partially offset by the continued decrease in incoming sales, leading to a 4% increase in sales from services. Other sales were up 20%, notably led by built-to-suit revenues. EBITDA after leases increased by 45 million euros compared to Q1 2022. and reached 399 million euros. Consequently, the margin increased compared to last year, which is consistent with our goal to progressively deliver margin expansions. Don't forget that the reclassification to intangible assets of fixed annual fees for some frequencies that we made in Q4 2022 has a positive impact on Q1 EBITDA Positive impact on EBD after leases will last until Q3 and will be offset in Q4 as the reclassification was made in Q4 2022. The current operating profit from activities of €126 million was €32 million higher than in Q1 2022. Last, you can notice that gross capex was €522 million in Q1 2023 a slightly higher level than in Q1 2022, mainly related to continued investment in our networks. On slide 19, let me highlight some recent developments undertaken by Book Telecom Enterprise in cybersecurity, industrial 5G, and collaborative tools. First, the acquisition of Aleo, a specialist in integration unified communication services, and cybersecurity. Second, a new partnership signed with Alten and Siemens France to help the promotion and the deployment of industrial 5G solutions. The last development of this non-exhaustive list is the launch of the new platform B-Flex WebEx, developed in cooperation with Cisco, and dedicated to small and medium-sized companies. This application offers fixed and mobile telephony solutions and collaborative features with a high level of data protection and privacy. Moving to slide 20, we are on the way to achieve all our 2023 targets that are an increase in sales built to customers, an EBITDA after leases of around 1.9 billion euros, and the gross capex of around 1.5 billion euros, excluding frequencies. And now, Pascal, I'm giving you back the floor.

Thank you, Christian. I will now briefly comment on the financial statements on slide 22. We have already discussed first quarter sales and current operating profits from activities at the beginning of this call. Few comments this morning. First, other parenting income and expenses were negative at 24 million euros in the first quarter. This amount notably includes non-current charges at brick construction in relation with the litigation adjournment in Singapore. This dispute, as explained in our 2022 URD, is associated with a building delivered in 1997 for which Bouygues Construction Singapore has recently been sentenced. Bouygues Construction could appeal. Second, financial results stood at minus 98 million euros compared to minus 47 million euros in Q1 2022. This increase is mainly due to the cost of financial debt that reached 69 million euros compared to 35 million euros in the first quarter 2022, mostly due to equance acquisition financing costs. Third, the tax charge was recorded for 3 million euros compared to a tax income of 27 million euros in first quarter 2022, consistent with the results of each period. And fourth, contribution of associates increased from minus 3 million euros to 15 million euros, notably thanks to Kipco Asphalt, a Colas subsidiary based in Thailand, and the fact that Salto, a video platform launched by TF1 with two other partners on now stocks, is no longer reporting losses this year. As such, net loss attributed to the group was minus €134 million, very similar to Q1 2022. I will now turn our attention to the group financial structure. Moving to slide 23, net debt was 8.8 billion euros at the end of March 2023. Compared to end December 2022, net debt was up 1.3 billion euros. As every year, this change is related to usual seasonal impacts. As such, net gearing was 64%. I remind you that the group benefits from a particularly strong financial position and that our financial credit ratings remain strong. Let's now turn to slide 24 to describe the net debt evolution between end December 2022 and end March 2023. Net debt increased by 1.3 billion euros since the end of last year. This change is mostly explained by the following items. First, acquisitions net of disposals totaling 38 million euros. There is nothing specific to highlight this quarter. This amount notably includes acquisition and disposals at Equance and Colas. Second, capital transactions and other for 18 million euros, including Briggs share buyback. And last, 1.3 billion euros from operations that I will comment in the next slide. Turning to the breakdown of operations for the first quarter of 2023 on slide 25, you can observe that. First, net cash flow, including lease expenses, increased by 50 million euros. Second, net capex was up 45 million euros, similar to Q1 2022. And third, you can see on the chart that the change in working capital requirements related to operating activities and others stood at minus €943 million, a usual change for Q1 due to the seasonality of our activity, but to be noticed, a lower amount this quarter compared to last year. As we do every year, we will remain proactive during all 2023 to manage the working capital. I will now conclude this presentation on slide 27. We are confirming the group outlook for 2023. We expect sales close to those of 2022, as well as an increase in current operating profit from activities. I remind you that this outlook is obviously based on 2022 pro forma financial information that assumes the equivalence acquisition was completed on 1 January 2022. Thank you for your attention. Operator, please open the floor for questions.

Thank you very much, Mr. Gargi. Ladies and gentlemen, if you'd like to ask a question, please press star 1 on your telephone keypad. Please ensure your mute function is not activated until you're certain to reach your equipment. So once again, please press star 1. Our first question is coming from Nicolas Cote-Colisso, calling from HSBC. Please go ahead, sir.

Oh, hi. Thank you. First question is on eQuals, because your guidance includes an improvement in working cap in 2023. Now Q1 is negative. So maybe you can help us with the phasing and the seasonality of the business for the coming quarters. And maybe still on equants, if you can give us an indication of the margin you are achieving on order index, please. And maybe a short one on telecoms. You just mentioned the 200 basis points increase in EBITDA margin was benefiting from the impact of reclassification of frequencies. Is it the same amount as in the previous quarter, which was, I think, 23 million? Thank you.

Starting with Equan's question on the working capital seasonality at this level. Probably you have seen in the past that we had this seasonality effect for the working capital requirements for big energy and services. We have the same profile for for equants as a whole. You can see that also with our competitors figures, not at the quarter because they don't have any publication of their quarterly figures, but you can see that at the half year for our competitors. Concerning margins for new contracts, we don't publish these figures. What we can say, and that's what we have said during the call, is that the trend is good and that we see an improvement in the order intake margins.

Regarding Telecom, hi Nicolas. The impact of 23 million euros in Q4 2022 was for the full year. So the impact in Q1 2023 is a bit more than 5 million euros. Positive impact compared to Q1 2022. It could be the same in Q2, in Q3, and Q4. You will have a negative impact compared to Q4 2022 of around 17 million euros. OK. That's clear. Thank you. On full year, this is totally neutral. OK.

Thank you very much, sir. Our next question is coming from Mathieu Robillard, colleague from Barclays. Please go ahead.

Good morning. Thank you for the presentation. I had a question on COLA first. You posted a strong revenue growth. You do flag that part of it is due to inflation. Could you maybe give us a bit of breakdown in terms of what has been the volume trend and what is the impact on inflation? And following up on inflation, at Coelas and more looking at the margin. I realize this is a special quarter, but more generically, are you finding it now easy to catch up with all the cost increases that you've had throughout the last 12 to 18 months? Second, on telecoms, could you qualify how you see the competitive environment Obviously, we've seen a lot of price increases on the back book and the front book. More recently, there's been a bit more tension on the promotional side. So I was wondering if you were worried about some of the declines there. And lastly, on telecoms, very strong margin. And you explained the impact of the frequency was quite low in this quarter. So could you flag where the savings are coming from? Thank you.

Starting with your last question, the first was related to what is the volume, what is inflation. We can say that probably we have an important inflation but also increasing volume in the US and in North America and probably we are quite stable in France and in Europe in terms of volume. How do we deal with inflation now? Let's say that It was quite a surprise to have such an inflation 18 months ago, and we had to adapt our contracts and the way we were working at that time. Now we have done these adaptations, so there is still some risk related to the inflation, but in a lesser extent.

For Bouc Télécom, in the mobile market, We continue to observe a trend of increasing ties and less aggressive promotional offers. Of course, you can have some flash sales that are launched during a short period of time, but that do not put into question our value strategy on our customer base. For example, yesterday afternoon, We increased the price of our 100GB offer from 14€ to 16€, so plus 2€ per month for a subscriber with taking this kind of offer. In the fixed business types are also growing as you can see in our ABPU trend and it is of course linked to the FTTH movement of customers from DSL to FTTH so this is good for us. Regarding margin Well, we are setting some costs mainly on a fixed part of our costs like HGNA and things like that the first point and the second point we are improving our efficiency in regarding FTTH installation FTTH acquisition and so on so we are better and better on this part of the business Thank you very much Thank you sir

Our next question is from Molly Whitcomb calling from Citi.

Please go ahead, ma'am. Hi. Thank you for taking my questions. I have two. Firstly, I noticed that you've repaid about $600 million of the syndicated loans. So I'm just wondering, can we conclude that that will be your strategy, repayment will be your strategy, or whether you'll be looking to refinance in the next coming years? And then secondly, Secondly, you said originally that there would be around 60 million in implementation costs. I know there was some in Q4 and I imagine there's some this quarter as well. Just wondering if you could talk a little bit about phasing on that. And actually, sorry, just the third one. Just wondering if we can come back quickly to inflation in the construction businesses. You said it's stable in Europe in terms of volume. Is this the same across the other businesses, particularly in terms of backlog, specifically at Acorns? Thank you.

Starting with a question related to the financing, you know that our strategy is to raise long-term financing, generally speaking, with bond issues regularly. So we still have this idea. You know that we have raised last year an important amount in order to refinance an important part of Equance. would continue so nothing new in that respect. Just to remind you that we have covered the interest rate for an important amount so the average cost of our financing is quite attractive in the current market. A second question is related to implementation costs at Equance, we are at the very beginning. I remind you that we have sold big energy and services shares to equants beginning of January this year. So we are at the early beginning of this course, but no news which is a source of concern for us. We are quite on track, nothing very specific to mention at this stage. And the third question is inflation. You know, inflation is never good news for us because for our customers it's an important issue. But we have a strategy which is quite clear in terms of inflation. We have two mechanisms available in order to cope with inflation. to transfer part of the risk to our customers by increasing prices with indexation formulas, with cost and registry contracts and so on. And we have a second strategy which is to transfer part of this risk to our supply chain and customer subcontractors or suppliers. In addition to that, we have in all our construction contracts contingencies which are here in order to cover the remaining part of this risk. I remind you that generally speaking, an important cost of energy is good news for equants because So decarbonization and price of energy allows our clients, our customers, to decide some investment in order to reduce their energy consumption or to decarbonize it.

Okay, thank you.

Thank you very much, Matt. Our next question is coming from Sam McHugh of BNP Paribas. Please go ahead.

Good morning, everyone. Thanks for the questions. Just two on telcos, please. The first one, just on the other revenue, you've called out the strong build-to-suit sales. Could you try and quantify the impact on EBITDA year-over-year from these sales, just to help us kind of bridge the gap, and whether you expect more of these sales through the year? And then secondly, on the mobile side, I see you have, like you said, changed the pricing back to 16, and you added just 27,000 mobile customers this quarter. I guess conceptually, is it important that you guys post positive KPIs in mobile post-grade, or do you have a more strategic rationale to maybe focus a bit more on value and focus less on the KPI itself? So is positive KPIs a really big, important indicator for you? Thank you.

About your first question on other revenues, there is no impact on EBITDA. The increase in other revenues is mainly linked to the Saint-Malo project, so the project we have with Cellnext on a GV called Nextloop to build a backhauling fibre network in France and there is no margin on this project. So no impact linked to the other new roles. Regarding mobile, our performance at plus 27,000 subscribers is quite good compared to the market. I think that RCEP published a few days ago the figures. you probably saw that the growth of the market is very low in Q1 2023, and it was already the case in Q4 2022. This is the result of the fact that everybody is mainly focused on value and not on volume, and it is also the case for Book Telecom.

That was very clear. Thanks very much. Thank you very much, Mr. McHugh. Ladies and gentlemen, if you have any questions, please press star 1 at this time. As we do not appear to have any further questions at this time, let's turn the call back over to Mr. Granger for any additional or closing remarks. Thank you.

Thank you for joining us today. We will be announcing half-year 2023 results on 28th of July 2023. Should you have any questions, please contact our investor relations team. Their contact information is on the press release on our website. Thank you.

Thank you very much, sir. Ladies and gentlemen, this will conclude today's presentation. We thank for your attendance. You may notice next.