Bouygues S.A.

Good morning everyone and thank you for joining us to discuss Bouygues first quarter 2024 results. With me today is Christian Lecoq, CFO of Bouygues Telecom.

Following our presentation, we will be answering your questions. Let's start with our highlights.

First, I would start by saying that we confirm the group outlook for 2024. Second, the very solid backlog in the construction businesses provides visibility on activity.

Third, Equans COPA and COPA margin improved year-on-year, in line with the strategic plan being deployed. Fourth, Bouygues Immobilier is pursuing its adaptation to the challenging market environment.

I will come back later on this point. And last, the financial structure remains robust with a high liquidity and the net debt improving strongly compared to end March 2023.

Let's now have a look at our key figures on Slide 5. First, let me remind you that like every year, and notably due to the sustainability of our activities, especially at Colas level, Q1 results are not indicative of half year and full year results.

That said, group sales were up 3% in the first quarter 2024 compared to the first quarter 2023, mainly driven by Equans on Bouygues Construction. Like for like on that constant exchange rate, group sales also increased by 3%.

In the first quarter of 2024, the group COPA increased by €17 million compared to the first quarter 2023 and reached €26 million. This increase was led by Equans, where COPA improved by €35 million year-on-year.

Bouygues Immobilier's COPA decreased by €26 million over the period in relation with a strong decline in activity measures being gradually put in place and having yet to produce their effects. Net result attributable to the group was minus €146 million, a level slightly down compared to Q1 2023.

Obviously not representative of the first half on annual results. Last, net debt was €7.7 billion, a strong improvement compared to the €8.8 billion at end March 2023.

The increase compared to end December 2023 was a usual increase due to seasonality. I will provide you more details about these figures later during this call.

Let's now turn to the review of operations on Slide 8. Let's begin with the backlog in the construction businesses.

The backlog at end March 2024 was at a very high level of €30.4 billion, up 4% year-on-year. The increase in the backlog was driven by both Bouygues Construction and Colas.

At end March 2024, note that 70% of Bouygues Construction and Colas backlog were in international markets, a proportion that is growing gradually each year. For example, at end March 2021, this proportion was 65%.

Looking into details on Slide 9 I would say that, order intake at Bouygues Construction amounted to €2.9 billion. Momentum remained good in the normal course of business, which represented around two thirds of the total order intake during the quarter.

Order intake also included significant contract in Q1 such as Rabat Hospital in Morocco for around €460 million and a solar farm in Culcairn, Australia for around €140 million. As such, backlog was up 4% or around €700 million year-on-year at €15.7 billion with international up 7%, offering visibility on activity.

At Bouygues Immobilier, the general market conditions remained challenging. However, reservations were stable overall in value, thanks to increase in block sales, offsetting decline in unit sales during the quarter.

For its part, commercial property market is at a standstill. As a result, Bouygues Immobilier's backlog was down 29% or around €400 million year-on-year.

Due to this situation, Bouygues Immobilier continues to adapt and took the decision to launch early April a negotiation procedure on a proposed employment protection plan preceded by a voluntary redundancy period. This decision is aimed at safeguarding the company's competitiveness in a challenging market environment.

This plan, affecting 225 jobs, will prioritize voluntary redundancies and internal redeployment. Last, Colas order intake reached €3.5 billion.

Colas achieved a good commercial performance in rail activities, notably with a significant order in Egypt for the new metro line between Alexandria and Aboukir, a contract worth around €310 million. In roads momentum was good in the US and in a lesser extent in France, offset by a decline in Canada and EMEA.

Backlog was up 6% or around €800 million year-on-year, with rail up 34% and roads down 4%. Let's now look at the construction activities key figures on Slide 10.

The construction businesses recorded results, which like every year, due to seasonality, are not indicative of the first half on the full year results. Sales were up 2% year-on-year and 3% like-for-like and at constant exchange rates.

First, Bouygues Construction sales were up 6% year-on-year, driven by international building and to a lesser extent by civil works. Second, at Bouygues Immobilier sales were down 15%, reflecting low activity and requiring further decisions to adapt the context as explained previously.

And third, at Colas sales were up 1%, driven by rail, up 5% and roads, up 1%. Current operating results from activities of the construction businesses was minus €264 million, slightly down compared to Q1 2023 impacted by Bouygues Immobilier where COPA was down €26 million year-on-year, highlighting the decrease in activity.

COPA at Bouygues Construction was slightly up compared to Q1 2024 with a stable COPA margin, and as usual, Colas had a non-representative minus €300 million in current operating results from activities, very comparable to Q1 2023 figure. Let's now turn to the review of operations for Equans on Slide 12.

Equans continues to deliver significantly improved results in line with its roadmap. During first quarter 2024, Equans commercial activity was solid.

Order intake stood at €5.7 billion, with continued momentum for significant projects such as data centers, smart buildings, solar farms, gigafactories, biotechnology sites, notably in Europe and in the US, and also good momentum for recurrent maintenance contracts and for small short cycle activities. One important comment is that the underlying margin of the order intake continued to improve, highlighting positive impacts of the performed plan.

The backlog stood at €26.2 billion, down 2% compared to end March 2023 figures, but up 6% or €1.4 billion compared to end December 2023. This level reflects the combination of strong order intake in Q1 2024 and selective approach to contract strategy as such as gradual exit from the new build activity in the UK due to market conditions.

Equans contribution to the group's revenue on COPA represented respectively €4.6 billion and €133 million with a 2.9% COPA margin, up 0.7 points year-on-year. This is a good start for the year.

To end with Equans on Slide 13. Let me just add that 2024 guidance is confirmed with Equans aiming for sales figure close to that of 2023 because it will factor in both the effects of growth in Equans markets and the scope effect related to the asset based activities disposals at end 2023 and the selective approach to contract strategy.

As a reminder, Equans is aiming for from 2025 onwards an acceleration in organic sales growth to align with that of market peers. In 2025 current operating margin from activities close to 4% and in 2027 a current operating margin from activities of 5%, a conversion rate before working capital requirement of between 80% to 100%.

Turning to Slide 15, let's talk briefly about TF1's results, which were released on the 30 of April. First, the TF1 Group has strengthened its leadership within its main target audiences in the first quarter 2024.

The total audience share among women under 50 who are purchasing decision makers was up 1.3 points year-on-year at 34.5%. The total audience share among individuals aged 25 to 49 was up 1.5 points year-on-year at 31.4% and the promising launch of TF1+ resulted in attracting 33 million monthly streamers on average in first quarter.

In the first quarter 2024, total sales were up 7% year-on-year, driven by good advertising performance. Media sales increased by 8%, with advertising revenues up 7%, driven by the return of most advertiser sectors on linear and by the new streaming platform TF1+.

Newen Studios posted revenue down 3% year-on-year, close to Q1 2023 level no main program having been delivered in Q1 2024. COPA amounted to €37 million, close to Q1 2023 level, and COPA margin was 7.3% in Q1 2024 versus 8.3% in Q1 2023, explained by, first, the cost of programs up at €217 million in connection with linear and streaming premium programming in the context of recovery in the advertising market.

And second, the integration of specific costs related to the launch of TF1+. Turning to Slide 16, I will end on TF1 Group by saying that 2024 outlook is confirmed as follows.

Keep growing in digital, building on the promising launch of TF1+, maintain a broadly stable current operating margin from activities, close to that of 2023 and continue to generate solid cash flow, enabling the TF1 Group to aim for a growing dividend policy over the next few years. I now turn the call to Christian Lecoq for Bouygues Telecom's performance.

Thank you Pascal, and good morning to everyone. Turning to Page 18, let's begin with the commercial performance in mobile and fixed.

At end March 2024, Bouygues Telecom had 15.5 million mobile plan customers, excluding MtoM, thanks to 17,000 new customers in Q1 in a more modest growth market. As you can see on the right side of the slide, we had a total of 4.9 million fixed customers at end March 2024.

This represents an increase of 38,000 customers in Q1.FTTH continued to experience strong growth with 134,000 new customers joining us during the first quarter. With a total of 3.7 million subscribers, FTTH customers represented 75% of our fixed customer base, up from 67% one year ago.

FTTH performance is a result of a strong FTTH footprint combined with a very good network quality. Let's have a look at the key figures on Slide 19.

First, we achieved 5% growth in sales billed to customers. On one hand, mobile ABPU was stable year-on-year at €19.7, confirming the move of some customers to lower bundles.

On the other hand, momentum remained good on fixed, with fixed ABPU up €2.2 year-on-year at €32.5. Total sales were down 2% year-on-year, affected by the decrease in other revenue, down 21% year-on-year, mainly due to lower built-to-suit revenues.

EBITDA after leases increased by €30 million compared to Q1 2023 and reached €429 million, benefiting from the growth of sales billed to customers and a tight cost control. EBITDA after leases margin increased by 0.9 points compared to last year, which is consistent with our goal to progressively deliver margin expansion.

The current operating profit from activities of €130 million was very comparable to Q1 2023, reflecting the continued increase in G&A, in line with Bouygues Telecom CapEx trajectory. Last, you can notice that gross CapEx was €476 million in Q1 2024, a lower level than in Q1 2023.

CapEx mainly related to continued investment in our networks. Moving to Slide 20, we are confirming our 2024 targets that are, an increase in sales billed to customers, an EBITDA after leases of above €2 billion, and gross CapEx of around €1.5 billion, excluding frequencies.

Regarding our EBITDA after releases guidance, I would like to remind you that, first, mobile ABPU has been remaining stable for two quarters. Second, the mobile market growth has become more modest.

Third, we continue to increase the size of our network in new areas. And fourth, we are in a rental mode in fixed business which generates technical cost in OpEx.

These results altogether imply that we maintain our EBITDA after leases guidance. 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, starting with the P&L.

We have already discussed first quarter sales and current operating profit from activity at the beginning of this call. Let me add a few comments this morning.

First point, other operating income and expenses which do not reflect operational activity were negative at €42 million in the first quarter. This amount notably includes non-current charges in relation with the Equans Management Incentive Plan which represented €23 million.

I remind you that the Management Incentive Plan only started in the second quarter of 2023. Let me also add that some non-current charges will be recorded in Q2 2024 in relation with the employment protection plan which was launched in April at Bouygues Immobilier.

Second point, financial results stood at minus €74 million compared to minus €98 million in Q1 2023. This improvement is mainly explained by the combined effect of the increase in cash on its remuneration rate, given that that is at fixed rate.

Third point, the tax charge was recorded for €7 million, an amount comparable to that of first quarter 2023. And fourth point, contribution of associates decreased from €15 million to minus €4 million, notably due to the decline of Tipco Asphalt contribution, a Colas joint venture based in Thailand due to slower start of activity in first quarter 2024.

As such, net result attributable to the Group was minus €146 million, down €12 million year-on-year. In a nutshell, I would say that the decrease in net result attributable to the Group could be simply explained by the consolidation of Colas losses at 100% versus 96.8% last year.

Let's now turn to Slide 23 to describe the net debt evolution between end December 2023 and end March 2024. As you see, net debt increased by €1.5 billion since the end of 2023.

This change is usual and related to the seasonality of our activities and includes, first, acquisition net of disposals totaling minus €7 million, including small acquisitions at Equans and Colas, purchase of TF1 shares and investment in joint ventures by Bouygues Telecom. Second, capital transactions of others for minus €24 million, including treasury share buyback on exercise of stock options.

And last, minus €1.4 billion from operations that I will comment in the next slide. Turning to the breakdown of operations for the first quarter of 2024 on Slide 24, you can observe that, first, net cash flow including lease expenses stood at €332 million, an improvement of €49 million compared to first quarter 2023.

Second, net CapEx was €633 million, an amount very similar to first quarter 2023. And third, you can see on the chart that the change in working capital requirement related to operating activities and other stood at around minus €1.1 billion, a usual change for Q1 due to seasonality.

As we do every year, we will remain very proactive during all 2024 to manage the working capital. I will now turn our attention to the group financial structure on Slide 25.

The group maintained a high level of liquidity at €13.1 billion, which comprised €3.5 billion in cash and equivalents and €9.6 billion in undrawn medium and long-term credit facilities. As you can see from the graph on the right, the debt maturity schedule is well spread over time and I remind you that our next bond redemption is in October 2026.

Moving to Slide 26, net debt was €7.7 billion at the end of March 2024, a strong improvement compared to end March 2023. As such, net gearing was 55%, improving by 9 points compared to end March 2023.

Last, I would tell the group benefits from a particularly strong financial position and that our financial credit ratings remain strong. I will now conclude this presentation on Slide 28.

We are confirming the group outlook for 2024. Equans will continue to improve its results in line with its strategic plan, perform plan.

Bouygues Immobilier will continue to face a challenging market environment with low visibility on the timetable for recovery in an uncertain economic and geopolitical environment. And after a year of strong growth, Bouygues is targeting sales and current operating profit from activities for 2024 that are slightly up on 2023.

Thank you for your attention. Operator, please open the floor for questions.

Hi, good morning. Thanks for taking the question.

I was wondering if you could give a little bit of an update on the state of the competitive environment in the telecoms segment. It sort of looks like there's been a bit of a pickup in promotional activity that may be a little bit slower year-on-year.

So just interested in how do you see the current state of competition there? Thank you.

A - Pascal Grangé So first I would like to remind you that thanks to the support of our customers who have followed us and appreciate the quality of our service. Our mobile ABPU has progressed for several years and we have now the highest ABPU in the mobile of the market.

Due to inflation we saw a decrease of purchasing power for customers and so the customer changed their behavior on this market. So today they subscribed to cheaper offers.

They kept the same terminal for longer period of time and there is a lower market growth due to the decrease of multi equipments. The consequences of that is, first, lower market volume growth, and second, a stabilization of ABPU for one year.

So what we can say about the market today is, first, on the high head segment competition we met moderates [ph] but at the same time, the competition is now mainly focused on the low end market which currently represents the most subscribed offers by clients, given context of purchasing power. Today, Bouygues Telecom would like to respond to customer needs by giving them purchasing power back.

And so we have decided to adapt our offers a few weeks ago with sustainable prices, so less gap between first year and second year, and some promotion, mainly for conversion clients. This new marketing approach will lead to stabilization or even a slight decrease of our mobile ABPU in the next coming months.

But the goal is to have a better customer satisfaction and so the result of that, a decrease in churn and an increase in sales. That is our marketing strategy in a more, I would say, a stable market in the mobile.

Regarding the fixed activity, the market has returned to more normal volume growth after the boost in FTTH since the pandemic. We have seen good volume growth in fixed and FTTH in Q1 2024.

Bouygues Telecom, the situation in terms of ABPU is very different compared to the mobile. Bouygues Telecom has the lowest ABPU on this market, on the fixed market for historical reasons of aggressive pricing policy that we had many years ago.

Today, our fixed services, our fixed network and our box equipments are recognized for the excellent quality. And so we market our offers at the same prices as our competitors.

And so our ABPU in the fixed should just mechanically increase as it catches up the market pricing level. And moreover, in the fixed business, we continue to gain market shares, whether in dense areas or in non-dense areas where we were not present with DSL.

Thank you.

Hi. Thank you for taking my questions.

I have a few. Just firstly, looking at the backlog at construction, specifically Colas, I'm just wondering if you're able to give us a split in terms of volume versus inflation, because if we adjust for inflation, it seems to me like there's been a little bit of a slowdown.

And I'm just wondering, is this something that you're seeing in terms of long-term projects or shorter-term projects? And similar question for Equans as well please, just looking at the backlog, how much of the decrease versus Q1 of last year relates to the sale of the businesses in the UK and the Netherlands?

And again, is this slowdown kind of more generally, because you're focusing on bottom line? Is it something that you're seeing more in shorter-term projects or longer-term projects?

A little bit of color there would be really great. Thank you.

Okay. Starting with the Equans backlog in UK, it's not related to the assets we have sold [ph] last year, because we have not realized last year the backlog related to these activities.

More related to what I mentioned earlier, which is the fact that we are - due to market conditions, we are declining the backlog we had in the new build activity, which is, in terms of profitability, not satisfactory for us. So that's the main reason for the decrease in the backlog.

Concerning Colas, we don't have any anxiety in terms of activity for this year. So that means that probably the decrease we have is related to long-term contracts.

But no - we have no doubt about the fact that we will be at normal level of activity at least this year, no anxiety, in fact.

Thank you so much.

Yes. Good morning.

Thank you for the presentation. I had a few questions.

First on Equans, I realize your guidance is for a slow revenue growth. But in Q1 you did post a solid revenue growth it seems.

And so I was wondering why you would expect that to slow down for the remainder of the year. Then on Colas, it seems that the backlog in France is a bit down.

And I was wondering if that reflected maybe less demand still from municipalities or regional project or it was just something very temporary? And that would be my two questions.

Thank you.

First on Equans, effectively in our strategic plan, in our perform plan, we have decided to be more focused on the bottom line than on the - during the first year, and in order to improve the profitability of Equans, which was not satisfactory at the beginning of this when we acquired Equans. So we are focusing on the bottom line.

This doesn't mean that we will have a decrease in revenues. We are selective and if we are growing, it's okay for us, but it's not a priority for the Equans group.

Second, concerning Colas backlog, globally it's quite stable. You have seen that minus - I think, it's quite minus 1%.

We have seen that the order during the first quarter are very good because we are perceiving now the first effects of the election cycle. And in France, you know that before election we had some - an increase in orders intake and we have seen that during the first quarter.

So it's okay also for France.

Thank you. If I can follow up actually with a question on telcos on fixed, as you flagged very strong ABPU [ph] growth, do you feel you're moving also up into - in terms of the profile of the customers getting higher and consumers on fixed?

And if that's the case, I mean, is that something you're taking from other players in the market or it's just that the market is becoming higher end in itself?

Well, on the fixed business, there is two things. The first one, you are right, customers are moving to FTTH and so the market is becoming more high end than it was in the past, first thing.

And the second point, as I said before, is the fact that we have the lowest ABPU of the market and so we are filling the gap with competitors as our quality in term of books, network and so on is now the same as competition. And maybe one point, but I'm not sure, probably the fact that ABPU is maybe higher in rural areas than in most dense areas.

And as we are taking some market share in rural areas, probably it could help us.

Thank you very much.

Yes. Good morning.

Two questions. First one is on Bouygues Immobilier cost cutting plan.

Could you quantify the restructuring cost that will occur in Q2 and also the cost savings plans and when this will have a positive impact on Bouygues Immobilier cost base? And second question is on La Poste Mobile acquisition.

Could you give us an update on the process and especially the timing for SFR decision to exercise or not the option? Thank you.

I will take the first question. In fact, as you know, we are under negotiation.

So it's quite difficult to have a precise view on what will be the final cost of this plan. Let's say that if we compare to what has been done in the same sector by others, we expect to have a cost around €20 million to €30 million.

And - but it's not a precise estimate because we are too early in the process. So we'll have to implement that cost cutting program which will take place during the next two quarters.

So, let's say that this will have a marginal impact during the third and the fourth quarter this year, and probably it will have more massive impact during 2025.

About your second question on La Post Mobile, so SPA has been signed and we got an employees' representative's positive opinion on the acquisition. And so SFR, which has a right of preemption, has been notified and now their decision is now pending.

Okay. Thank you.

Thank you for joining us today. We'll be announcing half year 2024 results on 26th of July, 2024.

Should you have any questions, please contact our Investor Relations team. Their contact information is on the press release on our website.