Ladies and gentlemen, welcome to the Vinci conference call. I will now hand over to Mr. Grégoire Thibault, Head of Investor Relations of Vinci. Sir, please go ahead.
Good evening, thanks, everybody, for attending this conf call. I'm with my colleagues from the Investor Relation team. We are pleased to share with you our nine months 2019 activity main figures. We'll be brief to have more time for the Q&A, and because we know it's a busy period for all of you, with a lot of other publication and conf call. What are the key takeaways of the first nine months period? Total nine months revenue of almost EUR 35 billion, strong growth of 11%, of which +6% like-for-like. The Q3 posted an acceleration with sales up 12% and +6% like-for-like. France, accounting for 55% of the total, is up 7%. International, 45% of the total, is up 16%. On top of a robust 5% like-for-like growth, revenue abroad was sustained by M&A with the latest acquisition of VINCI Energies, Eurovia, and VINCI Airports.
The currency impact was positive by 1%, due to the rise of several currencies against euro, and particularly the US dollar. Good revenue trend, but also dynamic order intake for each contracting division. In total, order intake was up 17% on a rolling 12-month basis at the end of September. Order book up 14% year-on-year, at a record high level of more than EUR 37 billion. It represents almost 12 months of activity versus 11 months one year ago. Net financial debt at the end of September amounted to EUR 23.2 billion, up EUR 7.1 billion over 12 months, mainly due to VINCI Airports' acquisition of London Gatwick Airport and, to a lesser extent, acquisition made by other business lines. Let's now have a closer look at the main divisions. VINCI Concessions, revenue up 16% in nine months. VINCI Autoroutes, revenue up 2%.
Traffic over the nine months was virtually stable, with light vehicles down 0.6% and trucks up 2.1%. The trend at the end of September is similar to the trend at the end of June, cannot be extrapolated due to adverse calendar and weather effects. VINCI Airports, revenue of almost EUR 2 billion, up 64% and 9% like-for-like. You already received our strong traffic figures for the airports two weeks ago. As a reminder, traffic was up 7%. Revenue was also boosted by our latest acquisition, of which Airports Worldwide integrated at the end of August 2018, Belgrade Airport integrated since the very end of 2018, and of course, London Gatwick Airport integrated since mid-May 2019. For contracting, sales of EUR 28 billion, up 10% on an actual basis and 6% like-for-like.
The main points to have in mind are, for VINCI Energies, revenue up 9% and more than 5% like-for-like to almost EUR 10 billion. It benefited from the acquisition made in 2018, and mainly PrimeLine in the U.S. and Wah Loon in Singapore, and in 2019 as well in the Netherlands, in Germany, and in France. Aside from the impact of this acquisition, organic growth remained robust during the period, as it has been for the last two years. It even accelerated to almost 7% in the third quarter, split equally between France and international markets. The order intake of VINCI Energies was quite strong in Q3 2019 and was up 9% at the end of September on a rolling 12 months basis. For Eurovia, revenue of EUR 7.5 billion, up 16% and 8% like-for-like.
In a nutshell, business leaders and order intake at Eurovia remains very strong in the third quarter, both in France and international markets, with international market accounting for 65% of the order book at end September. France remains well-oriented in the period, and so are Germany, U.K., and North America. In terms of scope effects, Eurovia figures include notably the industrial and roadworks activities acquired in late December of 2018 from Lane Construction in the U.S. North America accounted for 16% of nine months 2019 revenue versus 11% in the nine months 2018. For VINCI Construction, revenue of €10.8 billion, up 6% like-for-like. VINCI Construction's strong organic growth, both in France, with Grand Paris notably, and internationally in most of its operations, more than offset the ongoing weaker performance in oil and gas-related activities. On its part, the major project division is starting a new cycle.
After completion of several large projects, VINCI Construction Grands Projets has recently won significant contracts in North America, New Zealand, and the United Kingdom. For VINCI Immobilier, revenue rose 32% to EUR 811 million, thanks to a strong production both in residential and commercial property. In conclusion, in view of its strong performance in the first nine months of 2019, Vinci confirmed that it expects full-year revenue and net income to be higher than in 2018. We'd like to thank you for your attention, and we are now ready to take your questions.
Ladies and gentlemen, if you wish to ask a question, please press 01 on your telephone keypad. We already have a question from Elodie Rall from JPMorgan. Please go ahead.
Oh, hi. Good afternoon. I'll start with traffic, Grégoire, if you don't mind. I just wanted to understand how you interpret the traffic trends in Q3 with heavy vehicles still being quite strong and light vehicles being quite weak. We've seen that at APR as well. If you can give us a bit of your analysis of that. Do you think the heavy vehicles growth at the moment is sustainable? Equally, do you think the underlying trend in light vehicles is a bit higher than the reported one? I understand the Q4 comps are much easier, just to understand your interpretation of underlying trends. If I can ask a question on actually October performance, have we seen any difference? Lastly, on the residential sector in construction, are we seeing further weakness? How is the market there? Thank you.
Regarding the traffic, it's clear that the trends of 2018 and 2019 have been, let's say, polluted by many factors, positive and negative. It's very difficult to isolate and to analyze these different effects. It's difficult to see a kind of underlying trend, and it's too early to give any forecast. For the trucks, you notice that it remains very robust. That's clear. It can be explained by the exposure of our networks to Spain, notably, where the economy was a bit more dynamic, notably in terms of industrial production, and where the economic forecasts are slightly higher than for some other countries in Europe. That's a very important indicator to look at because have in mind that one-third of the trucks of the network that is affected come from or go to Spain. For the light vehicles, again, it's the same.
It has been polluted by many factors in 2018, 2019. Maybe in Q3, it has been impacted in July by the heat wave, and notably for the southern part of the networks. It makes things difficult. We are not going to enter, let's say, a kind of new normal. We are not particularly concerned. For the full year, our guidance is clear. We expect traffic growth to be in line with the French GDP, except exceptional events. The performance of the traffic this year should be printed in Q4 2019, where, of course, the comps are quite easy, let's say. For the trend in October, we don't comment. Your last question was regarding?
The residential market in France on construction.
For us, you saw that the reservation were flat. We have maintained quite a good trend. What we said since 18 months is that the market is fluttering. We can see the indicators on decreasing in terms of housing start and housing unit bookings. For VINCI Immobilier, probably it would be a bit aggressive to extrapolate the very good performance in nine months. The order intake of VINCI Immobilier is slightly down, so maybe for next year, it will be more cautious to consider the fact that order intake are down. There is a time difference, which can materialize in the figures next year. The comps are very high, and notably on the non-residential parts.
Right. If I can ask one more since I have you on the line. Any update on the cost pressure, the labor cost pressure that we've seen in H1 in construction in particular?
No, we don't. That's really a call dedicated to activity.
Okay.
As you know, Elodie, we don't comment.
Okay
let's say, bottom line.
All right. I tried. Thank you.
Bye. Good try. Bye, Elodie.
We have the next question from Jean-Christophe Lefebvre-Dupard from CM-CIC. Please go ahead.
Jean-Christophe Lefèvre-Moulenq [Foreign language] Hi. I have two questions. First, you gave us guidance for revenues and profit for 2019 as a whole. Could we have more flavor on VINCI Construction as margins are under pressure? Can we have more flavor? Secondly, could we have the traffic trend for A86 Duplex? Many thanks. [Foreign language]
Yes. Good try as well, Jean-Christophe. Regarding the margin, it's not the subject of the call, and we stick to what we said at the end of July, is that the margin of VINCI Construction for the full year should be roughly or slightly below the margin of 2018.
Okay. You speak
comment more than that. Yeah.
Okay.
We stick to what said the CEO during the analyst meeting in July. That's for your first question. The second question, A86.
Duplex.
You know that we don't publish traffic for all of our assets. You know that by heart.
Yes, I know that.
You know, especially for A86, we don't comment asset by asset. It's roughly a trend looking like, let's say, the trend of Cofiroute.
Okay. No more. Slightly positive only.
Looking like the trend of Cofiroute. Yes.
Okay. [Foreign language] Many thanks.
Our next question comes from Josep Pujal from Kepler Cheuvreux. Please go ahead, sir.
Yes. Hello. Just a follow-up on a first question. You say that the weakness in light vehicle traffic in Q3 was probably due, to some extent, to the heat wave. That would suggest that in September, where all that was over, traffic was more dynamic than in July, August for light vehicles. Is that correct? What would be the figure there? If you do not want to give the figure, maybe a gap compared to July, August.
No, the month which has been particularly impacted for the light vehicles was in July with the heat wave.
Okay. So now-
I will not comment month-on-month on that.
Okay. Well, to understand the pattern, heat wave in July, traffic down visibly, and then August, September probably decent because now heat wave, correct?
Yeah. We don't comment month by month. You have the Q3.
Okay. Yeah, yeah
you have the Q3 figure, and I don't want to start telling, "Okay, in July it was like that.
No.
August was like that.
Okay.
No. Again, what we said is that it's even difficult for us to read, let's say, it was a question of Elodie, to read what is the underlying traffic, but we are not concerned. Let's say looking forward 2020 to have a more clean base to see, because 2018, 2019 were very difficult. There were some positive this year and some negative, and the year before in 2018 it was the same. It's clearly very complex to read. That's why I don't want to start commenting the months. We said there were some calendar effects this year, but we already said that in H1. Traffic is down, but all in all it remains, let's say, a flattish trend, but we'll see in weeks to come.
Okay. Thank you.
We have a question from Gregor Kuglitsch from UBS. Please go ahead, sir.
Hi. A few questions from my side. Maybe you've disclosed it, but can you just remind us how much the year-to-date M&A spend is, or if you want the third quarter, so that we can get a sense on the cash? I think you've changed the definition of debt a little bit with leases and so on. Can you just remind us of under the new sort of definition, what the Q4 deleverage was last year? Sort of like-for-like basis so we can kind of get a sense what that should settle at. A question on airport. I was a bit surprised, I guess, by two things. One was the organic revenue growth of 11.6, and I calculated the traffic kind of the legacy assets fully consolidated to be around eight.
I guess it implies you've got 3.5% of, I guess, pricing or non-aviation revenues per pax going up. What's going on there? Could you elaborate if there's anything. Because that seems quite a lot higher than in history. Finally, can you just provide us what the actual Gatwick Q3 revenue contribution was, please? Because obviously we've only ever seen half yearly numbers from Gatwick, never seen quarterly. I want to get a sense for seasonality there, please. Thank you.
Regarding your first question for the net debt, you remember the goal in H1, the financial investments were EUR 8 billion. In Q3, we had a bit more with some bolt-on acquisition of VINCI Energies. At the end of nine months, the M&A, the financial investments were a bit above EUR 8 billion. A few hundred million EUR more, but close to EUR 8 billion. Slightly more. You can make your calculation to try to maybe estimate free cash flow over the period. It's feasible. The second question was regarding the net debt. In fact, last year, you remember with the IFRS 16?
Yes.
We integrated a part of the lease on last year, the same period at the end of 2018. There was EUR 159 million in the net debt, EUR 159 million, which are not included in our net debt anymore.
Okay. in other words, you are.
Because-
15.4 on the new basis by the end of the year, basically.
Sorry, can you repeat?
Your debt on December 18 on that basis was EUR 15.4 billion.
Exactly. You can, yeah, to estimate our figures. We can do like that. At the end of 2018, it was EUR 166 that you will not see again at the end of 2019, which has been, let's say, withdrawn from our definition of net debt.
Okay.
Yes, for the airports, you saw that the trend in Q3, the organic growth is strong, continuing acceleration. That's true in terms of sales, but that's true first in terms of volume effect because the traffic in Q3 accelerated compared to the traffic in H1, the traffic of VINCI Airports. In addition, you have a pricing effect, and you're right, there is as well some incremental effect of the non-aviation part. Let's say the trend remains good for VINCI Airports. For the new airports, so Belgrade, AWW, and London Gatwick, we said that the sales of these three airports were EUR 642 million in nine months 2019, 642.
Okay.
A large part of that comes from Gatwick, because in Q3 in Gatwick is very important. That's the summer months.
Yeah.
There is quite an important, let's say, seasonality in the business of Gatwick.
Thank you.
No worries.
We have a question from Stephanie D'Ath from Royal Bank of Canada. Please go ahead.
Hi, good afternoon. Thanks for taking my questions. The first one is on Gatwick traffic decline in the third quarter. Could you please let us know, excluding Thomas Cook bankruptcy, what the underlying trend was? Could you secondly please give us an update on the milestones and when we will get a bit more granularity on the regulation, at least when after you start investing in Montijo? Thirdly, your very strong trends at Lyon Airport, especially compared to Parisian airports, is that mostly driven by the new route opening? If you could give us a bit more granularity. Thank you so much.
Sorry, your second question, Stephanie, was on the regulation of which airport?
Of ANA Group overall.
ANA, okay.
After the cap, obviously it goes hand-in-hand with your CapEx investments to come in the new Lisbon airport.
Okay. We explained in the press release of VINCI Airports two weeks ago that traffic in Gatwick in Q3 was down 1%. It can be explained maybe by a kind of uncertainty in the Brexit environment. We said that it's mainly due to the collapse of Thomas Cook and to the strike in September of British Airways staff. We don't isolate, let's say, the underlying traffic. For Montijo, the process is still ongoing. All we can say is that the project of conversion of the Montijo military airport into a civilian airport is progressing according to our schedule. You know that an environmental study and public inquiry has been done by the APA, that's the Portuguese Environment Agency, and this agency is currently working on its final conclusion. It can take still a few more months to work, let's say, on the implementation technicalities.
We have to see with them now how to do that, how to implement all the decisions. You can think it's a long procedure, but it's a normal procedure for such a project. We are confident, and we will give you more information when the final agreement will be signed. For Lyon, yeah, it's a perfect illustration of the model, let's say, of VINCI Airports. We try to be quite, let's say, dynamic, creative, proactive, to open new lines, to open new routes, and that's the, let's say, the beauty of our diversified and international business model. We have a very strong network of airlines, of clients, in Lyon we could apply, let's say, our recipe and our method, and we could open new routes and notably some international routes. There was a low-cost, which has now its base in Lyon.
That's where they are, and they open new routes, 17 new routes. That's a lot. Let's say that's what we try to do when we buy an airport to make it ramping up and to propose some solutions for the clients and for the stakeholders.
Thank you.
Ladies and gentlemen, as a reminder, if you wish to ask a question, please press 01 on your telephone keypad. We have a question from Marcin Wojtal from Bank of America Merrill Lynch. Please go ahead, sir.
Oh, yes. Good afternoon. My question is on your order intake, which I believe is up 12% in the first nine months, that obviously would have benefited from the acquisition, so from the contribution of companies that were not in the perimeter in 2019. I'm just wondering, do you have a like-for-like number for order intake growth that would perhaps separate between the constant perimeter and the impact of acquisitions, if that is something that you track?
Yes. Usually, that's plus 12%, nine months 2019 versus nine months 2018, you're right, Marcin. The like-for-like, let's say, growth is very close to this 12% figure. It's, let's say, low double digits.
Okay. If I could have.
There is a good organic growth.
All right.
linked to some effects.
Okay. If I can have one more question on VINCI Construction. You're mentioning a new large project in a number of geographies, including the U.K. Can you update us on the high-speed 2, the HS2 rail project? Have you recognized anything already in the backlog? If not, what is the status of that project for Vinci?
No. HS2 is an ECI, so we did not recognize at this stage any amount in the backlog, so that's in our pre-backlog. An update, it's quite difficult to say, but HS2 is clearly a very important and a structuring project for the U.K. That's true economically-wise, and that's true as well on an environment point of view. So we have the conviction that the project will go ahead, but it will be at a difficult and tricky at this stage to try to give a more detailed timing. It's an ECI, it's not in the backlog yet.
All right. Thank you.
We have another question from Eric Lemarié from Bryan Garnier. Please go ahead, sir.
Yes. Thank you. I got two, if I may. First one, in France, for the civil works market next year, you will have some local election. Are you still confident your business will not be too much impacted by any slowdown related to this election? It was my first question. Second question regarding the U.K. I know it's not the biggest exposure for Vinci, have you been recently penalized by all the fuss around the Brexit saga? Do you consider that you are Brexit ready? Thank you.
For France, you saw, Eric, that the order book is robust, and we speak about a year-over-year, and that on top of that, our order intakes remain high. In other words, it means that the very good level of activity in nine months did not impact the order book, which is regenerating very well and very fast. Beyond the municipal election in France in March next year, in March 2020.
Yeah
we are, let's say, quite cautiously optimistic. I'll say this in English.
Yes.
There is still a good outlook for us or for the profession. First is that the local authority's financial health has improved compared to the last cycle. The second point is that the municipalities, the bloc communal in French, are not the only ones who are responsible for this investment. There are some need of CapEx to upgrade the public network of road in France. It depends from the clients, which are the regions. You saw maybe an article today in the press is that the quality of the public network in France collapsed in the international report. Something has to be done. On top of that, there are probably some new tramways, new light rail system to be built in some cities in France. Finally, don't forget that Eurovia will benefit as well from the Grand Paris.
Broadly speaking, we'll see what will be the year 2020. We don't panic.
Okay. That's clear.
For the Brexit, for the U.K., we don't feel some slowdown, let's say, in our local business in the U.K. at this stage. Maybe tomorrow, we don't know. Our nine-month activity was up in the U.K.
Yeah
for VINCI Construction and was up as well for Eurovia. Moreover, the order intake has been good in the U.K. in the recent weeks for these two divisions. That's We'll see. For airports, we already answered. Yes, there is maybe some uncertainties on the Brexit, but the slight decrease in Q3 for Gatwick was due to other parameters.
Okay.
To someone of so, no panic. The Brexit, who can tell exactly what will be the outcome?
That's right.
moving the saga, as you said.
Yeah. Thank you.
Our next question comes from Nicolas Mora from Morgan Stanley. Please go ahead.
Yes. Good evening, Grégoire. Just a quick one, and maybe following up on [BOA's] question. Just on the order intake, because it was particularly strong in Q3, and you got some large contracts outstanding out there. What did you actually book in Q3? Did you book the Old Oak Common station for EUR 500 million-EUR 600 million? Did you book also New Zealand? Just to have a feel for basically the big elephants in terms of contracts outstanding.
Hi, Nicolas. You're right. The trend in Q3 was very strong, and that's true not only for VINCI Construction. VINCI Energies was very well-oriented, Eurovia even better, and VINCI Construction, very solid as well. We booked several projects. Of let's say, maybe around EUR 100 million, so several of them, but we didn't book yet the station in London.
Okay. No station and not the rail link in New Zealand either, I suspect.
Let us check on New Zealand.
Yeah, it's just EUR 700 million.
Let's check. No, indeed, yeah, it has been booked in July. It has been New Zealand, the Auckland City Rail Link. Yeah, my colleagues tell me that LNG in Canada, in the western part of Canada, for VINCI Construction Grands Projets, an enterprise has been booked. That's one of the big elephants, and it's more than EUR 100 million plus I told you. We were quite successful again to book some quite important project, and notably in the U.K. Not the Old Oak Common station at this stage.
Ottawa as well. Ottawa, maybe.
That's good.
Okay.
Ottawa was already booked in H1. Ottawa, for Eurovia and VCGP, was already booked in H1, you know that.
Yep. Maybe just one quick follow-up on VINCI Energies, because you mentioned it. It's still particularly strong. No slowdown from industrial clients. Still benefiting from the structural trends, fiber to the home and so on. There's nothing, no clouds are there, basically.
I'll never say no clouds. The growth was strong. All the planets were aligned. It was a very good Q3 in terms of activity and in terms of order intake. It was, let's say, the case for every market. In a lot of markets, we said that the business was strong in Benelux, in Switzerland, in Eastern Europe, with PrimeLine doing well, Oceania, Brazil, and so on. We could not make, let's say, an exhaustive list, but the planets are quite aligned. By division, the infrastructure division was the most booming in the nine months 2018, with a very strong growth, let's say high teens. Below that, very good growth as well from ICT industry and building solutions. We don't see a slowdown at this stage.
Okay. Makes sense. Bye. Thanks a lot, guys.
Bye-bye.
Ladies and gentlemen, as a reminder, if you wish to ask a question, please press 01 on your telephone keypad. Well, it seems that we have no further question for the moment. Just as a reminder, if you wish to ask a question, please press 01 on your telephone keypad to enter the queue for the Q&A session. It seems that we have no further question for the moment. I give back the floor to the company.
Thank you very much for your attention. The investor relation team remains at your entire disposal should you have more question. Feel free to call us whenever you want, and have a great evening, and good luck with all these publications. Bye-bye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.