Vinci Sa Act

Thanks for joining us for this audio conference. You probably found on our website the presentation that will serve as background material to what we have to say. We are here at our head office in Rue Malmaison. I'm joined by the major chief executives of the various businesses who will be able to answer your question in due course. And Christian Laberry, Tomorrow he's celebrating his 31 years in the company and he plans to be the halfway mark in his career with us. On slides 12 and 13 it'll come as no surprise to you we were heavily hit by this pandemic that impacted without exception all our businesses and all our geographies but as we'll see with varying reactions depending on the country. First of all, I'd like once again to thank our people. There are many in number, France and abroad, who rallied during the lockdown phase. It's clearly their commitment that allowed us to continue to operate our companies. Thank you in particular to our colleagues from motorways, airports, railways, who already insured in an exemplary manner the their public service mission. Thanks to our maintenance and works teams who ensured that the energy water communications networks operated smoothly and also called upon to set up field hospitals and new hospital facilities. And my thanks to all those who rallied to organize and implement our numerous solidarity initiatives. Actions that were there to support those are in the front line, but also to assist the most vulnerable people. We have to continue because we've all understood that this crisis will indeed weaken people who were already in a vulnerable situation. have always believed that Vinci and the strength of civic engagement and the wave of exceptional solidarity prompted by this crisis has shown that it is indeed a shared conviction, a conviction that leads to supportive acts of solidarity at every level in the group and first and foremost on the ground. Turning now to the business, well, the impact on the business was almost immediate. It was massive. Mid-March, motorway traffic plummeted by 80 percent. Passenger traffic in our airports were reduced almost to zero. And the works contracting business reacted very differently depending on the country. For example, almost total halt in France, but business close to normal in Germany. and government departments shut down for the most part in France, in particular the urban planning departments that staff planning permission requests. So this leads to a difficult first half, revenue down 15% and EBITDA remains positive but sharply down, and net income posting a loss of €294 million. What is, however, remarkable And in fact, impressed us very favorably is the way our working capital held up so well, as well as our free cash flow, which, as you can see on slide 12, 13, leads to a sharp reduction of over 2 billion euros of our net debt. Over a year. So our foremost priority at the start of the crisis was to ensure our people and projects were safe. You can't just stop a project at the drop of a hat. You have to think about shutting down a job site before going ahead with it. And then we put in place business continuity plans so as to... ensure our public service assignments across our various concessions assets ensure an excellent level of liquidity because at the start of the crisis no one could predict today it's still the case but we see a little clearer than we could back in mid-March no one could predict whether the crisis was going to last a long time and very swiftly we began to consider a resumption in activity by joining drawing up in countries with government departments and the unions guides such as in france the opp btp guide to organize not just the recovery but it's very important for the future to work under covet because no one knows when this um pandemic is going to disappear naturally or when we'll have an effective vaccine. And we swiftly reviewed all ways of cutting expenditure, partial activity in France and equivalent system in many other countries, reduction in temporary personnel, a halt to all spending not strictly necessary. sharp reduction in capex and billing and recovery of outstanding receivables. The recovery is there across our businesses, but still very slow in airports. More about that in a moment, owing to the restrictions put in place by money countries. Now, the way in which countries responded to the crisis is clearly shown on the next slide, slide 14. You see that France is down 23% on the half, whereas the rest of Europe only declined by 4% or 5%. South America and the part of the continent where we're established, that's to say Brazil, Mexico, Chile, Peru, and Colombia, that area of the world is also sharply down. But on the other hand, North America continued to grow. And that's the positive impact of contracts signed previously, and notably in 2019 by Eurovia and Vinci Construction. Africa is more uncertain. It went slightly better than in France during the first half today. The situation is more challenging. Slide 15, we're beginning now to go a deeper dive. Vinci Auto Roots got off to a good start to the year. Traffic increased up 4.8% between the 1st of January and the beginning of lockdown in France on the 17th of March. Traffic then collapsed, as I said, decline of 87% light vehicles, 36% for heavy vehicles. And since the end of lockdown, gradual recovery that accelerated when the 100-kilometre constraint was lifted and I'll tell you later where we're at as we speak. At Vinci Airport we saw the wave coming thanks to our forward vantage points of our airports in Cambodia and Japan because we all saw that the wave came from that direction very swiftly traffic stopped just about everywhere as of mid-March through end of May and since the end of May there's a slow recovery in traffic, firstly domestic and then for Europe, the Schengen area, as of June. Big effort at Vinci Airport on spending and capex, but it didn't prevent us from continuing the most strategic worksites for the future at Cianoukville in France with the runways at Toulon-Rennes, Belgrade, Serbia, Santiago, where in fact the construction site never stopped in spite of heavy disruptions locally pre-COVID. And then Japan, Osaka, where we're inauguring, of course, remotely on the 5th of August. That's next week. The most important renovation of the historic airport at Osaka, Itami, the most important renovation for 50 years. It's important to say because it's a fine... sign of trust and confidence in these difficult times. Contracting, good news. Order intake particularly strong at VINHS2 line in the UK and France. The Link project, which will be the new head office of Total La Défense and several contracts for the Greater Paris Express project. Slide 18, very good resilience posted by Vinci Energy that worked particularly well during the half in Germany, Switzerland, Scandinavia, all in all, limited reduction, 4%, and this in spite of more significant declines, minus 10% in France, also declines in the U.S. because we're pretty well established in the new york area singapore where we continue to work but with slower work rates given covid issues notably the housing facilities for a number of migrant workers in singapore and in africa didn't prevent vinci energy to continue to acquire new companies a dozen of all sizes and the first half for additional revenue full year of some €200 million. Slide 19, very good responsiveness by Eurovia to adapt to the crisis and prepare the recovery which is the case as in other contracting businesses. declined far more significant in France than most of the other countries, with some countries such as the U.S., Germany, or the Czech Republic that over the half posted a growth over last year. Finchi construction, slide 20, same contrast, depending on the country, minus 27% in France, but only minus 5.5% outside France. Particularly difficulties with entrepôts contracting that's been suffering from a few years now of an oil and gas market heavily depressed. Things haven't improved notably after the very sharp fall in the price of oil started a few months ago. Vinci construction projects are often these as in the construction industry whose human density is stronger than at Vinci Energy and Eurovia. There are more workers and people involved in the same project with multi-activity, many different trades, and so we had to work long and hard to plan the recovery, rethink our job sites with sometimes staggered working hours to avoid too many people together at one time with one-way flows so that people don't come too close. We had to readapt changing rooms and shower areas so as to comply with social distancing, with very detailed reorganization of each and every workstation, all that to strictly comply with the health regulations and notably social distancing, as I said, We took full advantage of the period to acquire several major projects, those already mentioned. That accounts for the record level of order intake on slide 17 that I showed you, which is obviously most welcome on the eve of the economic phase of this crisis. Slide 21, real estate property development got off to a good start to the year, both residential as well as commercial property, went through a difficult phase. Worksites halted, almost total absence of booking of residential during the lockdown phase, minus 48% over the half, but also a freeze on the staffing of planning permission, which will pose a supply problem. That's really a pity because the demand for residential is once again strong. If we'd Look at everything that includes block sales to institutional investors. July bookings to date are up 17% over last year. So we're catching up, not fully, of course, but partially. The delay that occurred during the lockdown phase when there were no bookings... We must project and accelerate the emergence of new programs so as to have as soon as possible, hopefully at the end of the year, a offering to meet the very strong residential demand. I'm now going to hand over to Christian, as per usual, I'll come back in due course, talk to you about the future.

Thank you, Xavier. So, looking at slide 23, which shows, as has already been said, that revenue declined in the first half by 15%, with a sharper drop in concessions down 32% than in the contracting business, which was down 11%. At constant scope and foreign exchange, the decline in revenue comes out at minus 17%, of which minus 37% for concessions and just over 12% in contracting. The scope effect in the concessions reflects the inclusion for the first half as a whole of the revenue from Gatwick, which was included in the financial statements in May 2019. In contracting the new entries concern acquisitions by Vassi Energie Manion Europe as well as Vassi Construction in Excavation. These scope changes account for additional revenue of approximately €600 billion for the first half regarding currency variation. This was only minor because the Euro fell versus specific currencies such as the dollar. In fact, it was up versus other European countries as well as Latin American currencies and the Australian and New Zealand dollar. Slide 24 shows that the decline in first half revenue was far sharper in France, almost minus 23%. Then for the international business, down 5% at constant scope and minus 10% like on like. This reflects the complete standstill of most of our business in France for a month from the beginning of lockdown on 17th of March. And therefore, as Xavier has pointed out, revenue outside of France in the first half accounts for 49%. of total revenue versus 44% for the first half of 2019. This 49% will probably decline somewhat in the second half for the year as a whole, because the second half will show that business in France is almost back to normal, apart from our airport business. As exactly as I'm denying the decline in revenue in the first half, had a major impact on the profitability of all of our business because we were unable to adjust in real time our costs to reflect the declining business. This is particularly true for the business in concessions, motorways and airports, where costs are, for the most part, fixed costs. However, the contracting business also... suffered from major decline in their contribution due to the fact that it was impossible to cover all the structure costs, personnel and equipment. EBIT was down by 2 billion for the first half, but it's still positive thanks to the contribution from Vassi, Ottogut and Vassi. And as you can see from the slide, of course, the COVID impact was emphasized by seasonal factors and therefore The margins that you see for the first half do not reflect the margin forecast for the year as a whole. This is particularly true for Eurovia, whose income is mainly generated in the second half of the year. Now, moving on to slide 26, we are looking at the income statement. A strong decline in the contribution of companies accounted for under the equity method due mainly to the holdings in Versailles Airport. a non-recurring net charge of almost 120 million, reflecting depreciation of goodwill as well as tangible and intangible assets and a restructuring charge in our oil and gas business. The financial result is virtually stable. On the one hand, the cost of debt to the group has declined significantly. thereby offsetting to a large extent the impact of the consolidation of Gatwick Airport for the whole of the first half, and also a strong decline in our tax charge, reflecting the decline in net income, a positive contribution of minority interest, reflecting our shares in some consolidated subsidiaries. and also a net loss of £294 million versus a net profit of £1.36 billion in the first half of 2019. Slide 27, the situation is more encouraging than for the income statement. Free cash flow, which measures the group's performance in terms of cash generation, for the period under review, is down by a mere 500 million versus the first half of 2019, which is due to, first of all, EBITDA of 1.8 billion, down 50% on last year, and a variation in working capital requirements and current provisions of almost 500 million, whereas it was negative to the tune of almost 1.4 billion in the first half of 2019. Lockdown in this regard had a positive impact because while disbursements were limited due to the low level of activity, customer payments were significant due to a strong start to the year and also to the collection of long-standing receivables where a major effort was made. Payments for tax and interest expense were up due to the adjustment versus the entries for and also that we had a leftover from the CICE government subsidy. Operating cap tax was more or less stable. Part of the investment had already been launched before COVID and therefore could not be stopped abruptly and also the This item includes investment underway for the construction of the new head office, which has been ramped up since early 2019. Finally, investment for London Gap, which are included for the whole of the first half, as opposed to 2019. Investment in concessions are slightly up on 2019. This involves investments launched by Vassi Autoroutes, such as the Strasbourg Bypass, and Vasi Airport mainly in Cambodia, Serbia, and Portugal. Regarding acquisitions, there were very few acquisitions in the first half of 2020, approximately 100 million, involving approximately a dozen companies that have been mentioned previously by Vasi Energy, mainly in Europe. Regarding cash disbursement for dividends and share buybacks, this was very limited compared to 2019, further to the downward revision period. of the amount of the remaining dividend payment for 2019 and its postponement to July, most of which was paid out in new shares. Financial debt came out at €22.1 billion at 30 June versus a moderate rise of €400 million for the first half and down by over €2 billion compared to 30 June 2019. Now, moving on to the balance sheet. notwithstanding exceptional difficulties encountered in the first half. The balance sheet of VATI remains extremely strong, particularly looking at the past 12 months. Capital employed down 1.7 billion, mainly due to the improvement in WCR. Shareholder equity, excluding monetary interest, is stable. Non-current provisions up by 200 million and financial debt down by 2.2 billion. Slide 29, we redeemed loans maturing for a total of 1.6 billion, a bond issue of 750 million euros issued by VCSA in 2012 with a 3.4% coupon redeemed in March and a bond issue of 650 million euros issued by ASF in 2010 with a coupon of 4.1% and was redeemed in April and in May. With appropriate market conditions, we were able to issue a new bond issue for coffee hordes for $950 million with a coupon maturing to May 20, 2031, with a coupon of 1% only. This issue continues to the favorable debt schedule. You'll see this in the annexes. It has an average maturity of 8%. and you will note that we do not have to redeem in any one given year more than 2.5 billion, which is very reasonable given our cash flow. Furthermore, average cost of our debt comes out at 2.3% for the first half versus 2.4% for 2019 as a whole at 30th of June. It was less than that, but we did not have the impact of Gatwick at that time. We have seen during the crisis that The rating of VASI is very well regarded by investors. Our long-term credit ratings are A- with S&P and A3 with Moody's have both been confirmed with a stable outlook reflecting the strength of our concessionaire, our constructor model, our diversification in terms of businesses and geographies and the prudence of our financial management. As we repeat... Regularly at these meetings, we place great importance on liquidity, meaning our ability to very rapidly raise significant amounts of cash, first of all, in order to meet our commitments, namely redemption of our loans and issues maturing. Next, in order to be able to exploit acquisition opportunities, which are part of our strategy, and also in order to be able to deal with contingency situations such as the financial crisis of 2008, which led to the credit markets drying up for companies over several months. The extraordinary situation that we have faced this year validates the relevance of our policy, which some may feel is a little bit too conservative at times. Against this backdrop, as soon as lockdown began, we sought to consolidate our liquidity because We were entering uncharted waters. We were among the first beneficiaries of the reopening of the commercial paper market, thanks to the support of the ECB and Bank of France. And in parallel, we were able to obtain from our longstanding banks additional credit facilities with a one-year maturity for 3.3 billion euros. And finally, as I have just said, through Coffee Hood, We issued a 950 million bond issue maturing in 11 years after these various transactions. We had at end June a cash buffer of 18 billion breaking down into 5.8 billion of cash, commercial paper 1.2 billion, credits facilities 11.3 billion of which 8 billion euro maturing November 2024. The good news is that, contrary to our expectation, operating cash remained very strong throughout the period, meaning that our debt level at 30 June is barely above that of end 2019, whereas usually in mid-year it is significantly lower compared to end year due to the seasonal nature of our business. Thank you very much.

Thank you, Christian, before talking to you about the future at Vinci. I'd like briefly just to share with you a few thoughts stemming from this period of consideration that we've all experienced. First of all, we've all seen how much our colleagues were sorely needed and missed and to what extent we derive our strength, our energy, our creativity through interaction with others our colleagues, of course, but also all our stakeholders. If I mention that, of course, the underlying trends on the rise, such as homeworking, will expand. But let's not think it's a revolution because the company can never be reduced to a mere set-up of distant contractual ties. A company is first and foremost where a collective comes to the fore serving an objective, a strategy, and a shared dream, all that to say that it's not the end of office and real estate projects in general. It's never been more necessary. to affirm our social and civic responsibility and highly fragmented societies who more than ever need to strengthen the social fabric and it's really part of our culture we're already doing a lot and we'll probably have to take this to the next level going forward and it's even more necessary to accelerate our environmental policy because the immediate concerns affecting the health of our fellow citizens all of a sudden place in starker focus the worries about the health of our planet, more about that in due course, the ability to adapt that we've displayed to hold, to ensure the safety of our job sites, to ensure our public service missions, to revise our spending, our structures, our investments, to resume our job sites is really down to the credit of our local leaders. So we reaffirm our conviction that is part of our culture is that the right Decisions are taken close to the ground, first and foremost, and we have decided on the right organization, highly decentralized, offering the best adjustments agile and responsibly to the inevitable crises that will loom on our way. Other lessons learned, we know how to work under COVID, the famous guides that I mentioned earlier that were viewed as site resumption guidelines. We use them as guidelines to work under COVID. It's very important because we don't know if we won't see the emergence of new clusters. So we consider that we're well armed, well equipped so as to meet a resurgence of such hot spots from the epidemic. So new challenges arise for companies as well as countries. There are increasingly global challenges, the challenge affecting the state of the planet. We've understood the very global challenges. posed by the pandemic. There may be others tomorrow, big issues revolving around cybersecurity or others that don't appear today. So these global challenges must lead us to a change in mindset. By that, I mean that the top-down processed responses must be give place to swiftness, agility, horizontal and local cooperation, logics based on partnership and trust. And to illustrate these principles, if we consider the recovery plans that are launched here and there, the good news is that these recovery plans are all very green, focusing on the environmental transition. But I think that the implementation of these recovery plans should factor in the principles I've just mentioned. In a country such as France, urgency dictates that we inject far more swiftly investment capacity for local government because it's on that level that we can take account of realities on the ground. Turning to our businesses, now slide 32, French motorways are picking up faster than expected traffic levels in July on certain days has seen a return to growth even over last year. And the full month of June up until June week 30 is at minus 2% over last year. That's obviously good news. It reminds us that we will not make up for the absence of traffic during the previous phase, but traffic declined significantly. full year 2020 should be between 15-20% over 2019. We believe also as part of the recovery plan announced by the state, motorways might be mobilized by extending concessions so as to invest in transport decarbonization by accelerating the rollout of electrical charging points and hydrogen demonstrators or through intermodal infrastructure development with high-service bus routes or a free-flow toll system. Concessionaires can also offer investments in peri-urban areas. networks that could form part of the decentralization announced by the Prime Minister of the National Road Network, either for the regions or the departement. Vinci Airport, slides 33, 34. Things are slower. Vinci Airport is recovering more slowly, going to border. restrictions and uncertainties brought about by the emergence of clusters such as very recently in Barcelona that led a number of UK citizens to give up their holiday plans in Spain. That's a major tourist destination. for them as it is for other European countries, starting from almost zero in terms of passenger traffic. We were at minus 83% during week 30, that's to say last week. We expect, and this is illustrated by the two-point charts you see on slide 33, our positioning should allow us to resume activity faster than others because we're at... Three quarters of VFR, visiting friends and relatives and tourism, minus one quarter on the professional travel segment that will be slower to pick up than the other two segments. The other pie chart on the left where you see that our customer base is 50% domestic and intra-European. which should also favour us and the long haul or the long distance segment accounting for only 10% of point-to-point travel in our various airports. We expect the end of the year we'll see a traffic drop of the order of 65%. 2021 will once again be down. versus 19 but quite possibly at least we hope with a traffic level that will bring us to close to break even in terms of net income on that business so it's in this business quite naturally that we reviewed downwards significantly our capex as illustrated on slide 34 and contracting as was said We're off to a good recovery, close to normal, particularly in France. What's striking is that France, that was almost at a standstill during the lockdown phase, is now pretty much the geography that's the closest to a return to normal. It's also the case for Germany, but Germany declined far less than France. The good news is obviously our order book, as you can see on slide 36, at an historic high. 42.9 billion euros. That's excellent news, even if it does conceal the weakness of small and medium-sized projects. It will all depend on the speed at which the various recovery plans across countries will be implemented. We hope that will be as swift as possible. We expect contracting to record in 2020 a drop of 5%. to 10% over the previous year, Vinci Energy probably at the low end of the range, and Vinci Construction probably towards the top end of the range, Eurovia being somewhere between the two. We expect that inevitably there'll be a reduction of our EBIT margins across the year, but probably limited to 150, 200 basis points of the EBIT margin over last year. So 2020 won't be a good year. We're expecting that to be the case for some months in these quite exceptional circumstances. The board that met yesterday decided not to pay an interim dividend because of a negative situation. result recorded during the first half but this in no way prejudges what we've decided early 2021 in respect of the full year 2020. What is important is to look to the future and we are rallying to support the economic recovery in communities where we're a key player both in concessions and contracting. We believe that we have significant assets to bounce back as of 2020 depending on how health conditions evolve so as to return as soon as possible to sustainable growth partly. We have a long-term business model well adapted to current challenges, energy efficiency, new mobility or communications requirements and as already mentioned concessions and PPPs in the broad sense of very effective levers for recovery that are available to public authorities and we are on promising markets across our businesses for the long term and the high responsiveness of our companies thanks to our highly decentralized structure Quite extraordinary commitment on the part of our teams. An order book at an all-time high and a very robust financial situation allows us to remain confident and we can only do a good job when we're confident. So 2021 will be the year of the rebound and we see this far more clearly in the coming months.