Ladies and gentlemen, welcome to the Vinci conference call. I now hand over to Grégoire Thibault. Sir, please go ahead.
Good evening. Thank you, Laura. Thanks, everybody, for attending this conf call. I'm with my colleagues Alexandra Bournazel and Sébastien Pezeron from the Investor Relations team. We are pleased to share with you our nine months 2018 activity main figures. We'll try to be brief, as we know that's a very busy period for all of you, with a lot of publication and conf call. We hope you had time to read our press release. If not, what are the key takeaways of the first nine months? Total nine months 2018 revenues are up 7.7% to EUR 31.4 billion, plus 3.3% on a like-for-like basis. The Q3 posted an acceleration, with sales up 9.5% and plus 4.3% like-for-like. France, accounting for 57% of the total nine-month activity, is up 4.8%. International, 43% of the total activity, is up 12% and 2.3% like-for-like. Activity abroad was sustained by external growth.
Vinci has been dynamic in M&A over the last month. On the other hand, the currency impact was negative by 2.6% due to the depreciation of many currencies against the euro, and notably the dollar, US dollar, Canadian, Australian, and Kiwi dollar, the British pound, and the Swiss franc. Let's now dive into the main division. Let's start by VINCI Concessions. Sales up 5.6% at the end of September. VINCI Airports, plus 12.3%. You already received our traffic figures for the airport, still very dynamic. Excluding Japan, impacted by a typhoon in September, traffic was up 6% in Q3 and 8% in nine months. In addition, note that the period benefited from the integration of new airports, Salvador in Brazil since January, and the recently acquired portfolio of Airports Worldwide since the end of August. VINCI Autoroutes, plus 3.6%. Traffic remained robust.
In Q3, traffic was up 1.4%, of which light vehicles plus 1.3% and trucks plus 2.7%. At the end of September, traffic was up 1.9%, of which cars plus 1.7% and trucks plus 3.3%. This traffic trend is in line with our guidance. For contracting, sales up 8.4% and 3.1% like-for-like at the end of September. Q3 was strong as well, plus 11%, of which plus 5% like-for-like. In more details by division, VINCI Energies, plus 17% to almost EUR 9 billion. Thanks to M&A, as you know. As a reminder, the main acquisition of VINCI Energies over the last 12 months were Wah Loon in Singapore, integrated since April 2018, PrimeLine in the U.S., integrated since March, Infratek in Sweden since January, Infratek and Horlemann in Germany since the very end of 2017. External growth, indeed, but not only.
The organic growth was high at +4%, quite homogeneous between France and international, where the trend was very well oriented in Q3. +8% of organic growth abroad. Eurovia, activity of EUR 6.5 billion, up 10% and +8% like-for-like. Q3 posted a dynamic 15% growth. France was well oriented on the period, and so were Germany, U.K., Eastern Europe, Canada, and Chile. VINCI Construction, always more difficult to summarize. EUR 10 billion of sales, growth of 1% at the end of September, of which +3% in France and -1% abroad. Solid trend in France, around Paris, notably. Solid as well in Central Europe and Australia. Sales decreased in Africa, in the U.K., and in oil and gas markets. Finally, regarding the order intake, they are up 5% at the end of September after +3% in H1, a good trend in Q3.
Per division, the nine months order intake have the following trend: +18% for VINCI Energies, +10% for Eurovia, -6% for VINCI Construction due to high comps with some contracts on Grand Paris won last year. In France, nine months order intake were down 8%, and international order intake were up 21%. At the end of September, our backlog is up 7% year-on-year at almost EUR 33 billion. In conclusion, Q3 and nine months revenue trends were positive. The group is on track. Our business model is strong. We are very serene for the rest of the year and confirm our guidance. As a reminder, in a nutshell, our guidance is for the full year 2018: Vinci expects to see growth in revenue, operating income, and net income. We would like to thank you, and we are now ready to take your questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, please dial 01 on your telephone keypads now. We have a first question from Vittorio Carelli of Santander. Please go ahead, sir.
Hi, Grégoire and team. I have three questions on my side. The first one is related to the other concession. If you can explain what happened during the third quarter, because I was aware that we had some perimeter issue regarding the consolidation of new assets. At the same time, I would say the revenues were not reflecting exactly these new assets inside the perimeter, and if you can explain what happened there. Second question is regarding the guidance in contracting. Do you think that we still have, I would say, growth in the fourth quarter for contracting, continue the guidance for the full year, or we are at risk that probably contracting top line could not be growing as you expect due to the international business mix? The last question is related to ANA concession.
If you can comment about the recent press news about the possible extension in exchange of the Montijo CapEx. Nothing more than that. Thank you.
Thank you, Vittorio. We will come back to you in five seconds. Vittorio, I am back. Regarding the other concession, that is small amounts. That is true, but anyway, that is a good question. In Q3 2018 versus Q3 2017, this other concession sales were slightly down. That is mainly due to our stadium activity because in Q3 2017 was, let us say, exceptionally high, with a lot of events organized in Stade de France, close to Paris, and in Olympic Park, in London. Q3 2017 was very high, and that is why you can see that decreasing. That is the main reason. That is on stadium. Your second question was What? Sorry.
I am sorry. It is not related to possible underperformance in traffic of LISEA.
No. You hide the question in another one. That is very smart. For LISEA, Vittorio, as we said in the press release, the traffic is very strong. It is in a ramp-up. You remember we opened the second section of LISEA in June, we are typically in a rampant phase, and traffic is very strong and above what we expected. It confirms the good outlook we have for this asset. No, it is not due to what we wrote in the press release. Traffic is up. That is the stadium. That is the reason. Your second question on contracting, no, we do not change a single word to our guidance. We are confident. We are serene, as we told you. Activity is strong at the end of nine months. It has been good and very good in Q3. No, it is fine.
No, of course, we don't change our guidance, neither for activity, neither for profitability. No, we stick to our guidance.
Okay.
Finally, your third question was on ANA. You're right. There were some press articles a couple of weeks ago or three weeks ago. We don't comment this kind of newspapers. The journalists can write whatever they want. What I can tell you is that the negotiation on the new airport in Lisbon are still ongoing. An agreement should be found soon, maybe by year-end, we cannot tell you more than that because by definition that's a negotiation. We will keep you informed once we have more news, still ongoing. Okay? Grégoire.
Thank you. The next question is from Elodie Rall of JPMorgan. Please go ahead.
Hi. Good morning, Grégoire. Just three question as well on my side, if I may. First of all, on traffic on toll roads in Q3, you reported traffic levels or growth more or less in line with what APRR reported last night. They did mention that there was a calendar impact, which I think was around 1% due to the fact that one non-working day became a working day in Q3 versus last year. Can you confirm that it is the same for VINCI Autoroutes or motorways? That's my first question. Second, just a question on net debt. It's up one and a half billion year-on-year. I know you mentioned all the acquisitions that you've made recently. I just wanted to make sure what is included in that net debt level versus what's not included. In particular, is the Eurovia's acquisition in the U.S. included in it?
Just my third question quickly, how much was Airports Worldwide contribution to Q3 revenues, please? Thank you.
Thank you, Elodie. Regarding the traffic for Q3, what can I tell? The growth we see is quite clean, I would say. That's what we could call an underlying growth. We had some plus and some minus over the nine-month period, but all in all, that's neutral. Regarding the calendar effects over the nine months, some were positive, some were negative. Again, all in all, it's neutral. Regarding Q3, we didn't have, let's say, some significant calendar effects to isolate, let's say.
Okay.
The second question, the net debt. Yeah, I told quite an active policy in terms of M&A over the last month. It does not include Lane Plants and Paving you were referring to. It includes Airports Worldwide, which has been closed at the end of August. Okay. In the net debt, there is not yet Lane Plants and Paving, which has not been closed yet. Finally, speaking about AWW, that's your last question. The contribution, let's say, is quite small at this stage. It's only for one month. Have that in mind, Elodie. It has only been integrated since the end of August, so the contribution was only for September, and it was less than EUR 10 million.
Okay. Thank you.
No worries.
Thank you. The next question is from Nabil Ahmed of Barclays. Your line is now open.
Yeah, good evening, Thibault. Thanks for taking my question. I actually got two. First one is on the order intake in the third quarter. If you could give back the numbers by division, and if you have that on a like-for-like basis, so excluding the acquisition, I'd be interested to hear how the intake has performed during the third quarter. Second question, I guess, focusing on those divisions that have significantly changed in terms of like-for-like growth, and it looks like it's primarily Eurovia, and it looks it's primarily in France, where the like-for-like growth has accelerated in the third quarter. Are you seeing a pricing component here? My question, I guess, is to what degree this is volume, this is the market that has been good for you guys.
This is executing your backlog, or to what degree this is related to an increased pricing on the materials side of things.
Thank you, Nabil. The order intake in Q3, you guys can make the calculation of plus 5% at the end of September, plus 3% at the end of H1, end of June. It means that in Q3, the order intake in total were up double digits, like plus 10%. You can consider that half of that was from, let's say, M&A term of growth impact. Your second question, that's a good analysis, yeah. Lots of strong organic growth in Eurovia. That's due to, let's say, a good market, speaking about France. There is a pricing effect, you're right, in this increase, but we don't quantify, we don't break down. The market is very good, and we are still in a positive electoral cycle ahead of the municipal election in spring 2020. The trend is good. It should remain good.
In this growth, yes, there is a price effect. Sorry, we don't divide on that.
My question is, could the price effect be significant enough to really explain the change in the-
No. Sorry. No. If it was your question, no. The market is very, let's say, well-oriented Very well oriented. Of course, I'm not going to deny there is a price effect, but not to explain, let's say, such a swing. That's mainly due to the good market trends.
Okay. Thank you.
Thank you. The next question from Mehdi Boudokhane of Raymond James. Please go ahead, sir.
Yes. Hi, Grégoire. I have two questions. One follow-up on AWW.
Could we have an idea in terms of revenues, on a 12-month basis? Secondly, on VINCI Construction, could we have more color on the performance, which actually remains weak in terms of organic growth? Is that linked to Africa?
Thanks. Hi, Mehdi. Thanks for your questions. The first one, regarding Airports Worldwide. What I said to Elodie is that more or less on one month, you have a contribution of sales below EUR 10 million. You can multiply by 12 and maybe again, it's quite marginal in terms of contribution, but it gives you an idea on a full year basis. Regarding your second point, you're right. The answer was in your question. VINCI Construction, Africa, the sales were still done as well on the oil and gas market. That's it.
Okay. Thank you.
Thank you. The next question is from Gregor Kuglitsch of UBS. Please go ahead.
Hi. I've sort of figured out the net debt side of things. Obviously, you're saying EUR 16 billion. Obviously, it's hard for us to know exactly what's going on with all the components, but kind of excluding acquisitions, and if you look over the last few years, and that's I guess where it becomes a little bit tricky for us because of the timing of M&A and so on. What would you say is kind of the normal seasonal cash flow in the fourth quarter? Is it kind of EUR 1 billion or something like that? You didn't mention Belgrade in the acquisition, because obviously you mentioned Lane. Clearly that's pending U.S. antitrust approval. What's happening with regards to Belgrade? Question on kind of just your guidance.
I was just looking very briefly on your website and looking at the consensus recurring net income, and I think it kind of implies hardly any profit growth in H2 net income. I'll just keep it simple. Obviously, you've just done pretty solid sales growth in the third quarter. You're not talking about any margin pressures. I want to understand whether you think that that's too conservative. Thanks.
Thank you, Gregor. Regarding your question on cash flow and on working cap variation, you know that in our activities, that's always very difficult to predict. That's at the very end of the year that you have some cash inflow. That's really, and that's true, at the end of December, that you have more visibility on your working cap. Anyway, to give you more colors, the trend of working cap at the end of September was around the same that the trend you saw at the end of June 2018 versus June 2017. Anyway, over the period, our free cash flow in the nine months 2018 was slightly above EUR 1 billion. It was slightly lower than EUR 1 billion last year in the same period. In other words, our operating leverage more than compensated this working cap change. Below that, you have some financial investments.
No, there is nothing, let's say, unusual. We already spoke quite a lot about the working cap trend in H1, and you remember that the deterioration of the working cap in H1 2018 was due to the pickup of activity for Eurovia and VINCI Energies. At the end of the day, that's a positive signal for the business. It was due as well to some investment for VINCI Immobilier with acquisition of field and less advanced payment for VINCI Construction and more stringent rules in terms of delay of paying our subcontractors. No, there is nothing, let's say, scary. Second question was on Belgrade. We still wait for the closing and still by year end. Too conservative on the guidance, your third and last question, Gregor. No, we will maintain our guidance.
We are not going to split and to adjust our guidance, let's say, with every quarter or every semester. That, we keep it.
Okay. Can you maybe just help us in aggregate, how much were the M&A/financial investment in the third quarter in terms of spend? We can calculate ourselves.
In the nine months, the M&A envelope was EUR 1.7 billion, slightly below that. We communicated in H1 for the M&A envelope, you have the Q3. For nine months, M&A-
Thank you.
No worries.
Thank you. The next question is from Stéphanie D'Ath of RBC. Please go ahead.
Hi, Grégoire, thank you for answering my questions. The first is on Bouygues, which recently downgraded their guidance because of construction. I was wondering whether you were seeing any change in the environment like them from that perspective. My second question is regarding the North Carolina contracts you just announced and whether there would be a concession opportunity down the line. Finally on ADP, the recent regulatory developments. Do you feel the likelihood of the privatization is increasing or decreasing? Thank you so much.
Wait, just one question, Stéphanie. Hello. It's not clear. We don't hear you. Just your second question was about Eurovia in North Carolina. What was exactly the question?
Announced that Eurovia winning two contracts to develop the major-
Yes
in North Carolina.
Yes.
I was wondering if maybe in a few years time, those could become potential managed lane concessions, or if it was just a contract, and they were not planning to tender the concession.
No, it's just a contractor. As far as I know, the management of the concession will be done by the public authority, by the DOT, the Division of Transport in North Carolina, so that there is no, let's say, concession opportunity at the end of the construction. Regarding your first question, with the profit warning of the Bouygues Construction and Colas. If we start by Colas and the read across for Eurovia, yes, that's your question. The year has been difficult for our rail works activities with our subsidiary called ETF, E-T-F, and it's partly due to the French National Railway Company strikes, which took place from April to July 2018. They affected this subsidiary's activity and profitability and created some problems in terms of transportation of aggregates. However, the good financial health of Eurovia other business allowed us to absorb this non-recurring issue.
As a consequence, Eurovia's guidance, which is a rise in revenue and in EBIT margin, remains fully valid. Regarding Bouygues Construction and the problems on data center and on biomass plants. What can I tell? The biomass plants are very complex projects on a technical point of view, and that's very demanding in terms of delays. Neither Vinci Construction nor Vinci Energies never built any biomass plant. Vinci Energies can be active on some biomass plants in Germany, for example, but as a subcontractor, which is totally different. Vinci Construction built in the past two waste to energy plants. Waste to energy plants and biomass plants in terms of complexity and on technical point of view, really it's not the same. These two projects have been delivered. More generally, because the question is always maybe on the U.K. where these problems occurred.
VINCI Energies is not very exposed to the U.K. Actually, the U.K. accounts for less than 1% of VINCI Energies sales. Our policy in the U.K., you know that by heart, is to be very selective and to be very opportunistic. Regarding the data centers, VINCI Energies does some data centers in Singapore, notably with Wah Loon, the company we acquired last April, I told you about in the introduction. That's a company specialized in this business. All in all, with the project of Wah Loon, we haven't been confronted with major difficulties in this particular segment, and we hope and we think we'll continue to do so.
Thank you.
Other question, it was on ADP, right?
ADP.
Your third question, Stéphanie?
Yes, that's right.
Stephanie?
Yes.
Yes, that's right. Okay. What do you want to know on the ADP?
Just maybe comment on the recent developments and how you see things.
Okay. Yeah. Your recent development, indeed, the Assemblée Nationale, the National Assembly, voted in favor of some articles of the PACTE law, loi PACTE, and notably allowing the ADP privatization. It was at the beginning of October. That's a good step made. That's now into the hands of the Senate. To be adopted, the PACTE law has to be approved by both chambers, the French Parliament, the National Assembly, and the Senate. We think such an approval for the loi PACTE, for the PACTE law, could occur, I don't know, somewhere around early 2019. At this stage, we don't know much more than that. What can we tell? What will be the main terms and condition of the privatization? We can only express, let's say, an interest in principle, because we don't know yet the rules of the game.
When do you think the government would start discussing the cahier des charges, et cetera, once it's privatized? What do you see?
We don't know. I don't know, Stéphanie.
I wish I knew, but
I don't know. I have no idea, really.
Okay. Thank you, Grégoire.
Bye-bye.
Thank you. The next question is from Eric Lemarié of Bryan Garnier. Please go ahead.
Yes. Good evening, Grégoire. Just two questions on my side. The first one, I'm just curious, could you maybe share with us the revenues generated by ETF, the subsidiaries of Colas on an annual-- Of Eurovia, sorry. Maybe the revenues on an annual basis. A second question regarding VINCI Airports. I understand that according to the press, VINCI Airports has been criticized in Japan following the typhoon incident. Could you confirm that? And is there any political risks there because of that? Thank you.
Thank you, Eric. Regarding ETF, the sales in 2017 are slightly above EUR 400 million.
Okay.
Okay. For VINCI Airports and the typhoon, which was in Japan in early September, I would say that's some noise, political noise, we don't comment. We work hard to put the situation on track. All the stakeholders really hands-on did a great job. Finally, the Kansai Airport could reopen quite quickly, and we are proud of that. Now the traffic is back and the thing's cruising speed. That's a bad moment we face under the recent criticism. Really, we don't comment. That's only some noise.
Okay. You didn't have to invest more in order to better protect the asset in the future against this type of weather impact? No.
Maybe, it's not, let's say, short-term talks. We'll see.
Okay, fair enough. Thank you.
Bye-bye.
Bye-bye.
Thank you. The next question is from Nicolas Mora of Morgan Stanley. Please go ahead.
Yes, good evening, Grégoire. Just a couple of questions. One on VINCI Energies. The comps base was quite tough in the third quarter, and you had quite a blowout quarter. Is there anything specifically you want to highlight there? Just to basically to know whether or not we need to extrapolate a bit more growth into Q4 and early next year. Basically the same for France. Second one, just coming back a bit on rail and especially at Colas. Can you confirm you're not party into any of these medium long-term contracts with SNCF, where the conditions seem to be particularly harsh, so that we can assess a little bit the impact, whether it's only going to be basically limited to the strikes in Q2 or whether basically the negative effect from SNCF contracts could drag on into 2019 or 2020?
Hi, Nicolas. Yes, a very good level of activity for VINCI Energies. In France, when you saw in terms of organic growth, you saw the trend was quite linear in Q1, then Q2, then Q3. That's in general the case in France. It's not the case out of France for VINCI Energies abroad. Why is that? Because we operate in 52 different countries and hundreds of business units. Sometimes you have some business units up, sometimes down. But this quarter, it happens from time to time, all the planets were aligned abroad, let's say. That's why there was a very good and exceptional, let's say, organic growth. After, it's probably more, let's say, reasonable and realistic, not to extrapolate too much. Again, all the planets were aligned this quarter. Maybe it will not be the case. Who knows? Don't be more cautious.
The second question was on-
For Colas, [Foreign language]contre SNCF.
Okay. Yes. What we told is that we had such an activity with SNCF. The strikes penalized the activity and the profitability. At the end of the day, the good, let's say, trends of the other business of Eurovia compensated and absorbed this extra cost. It doesn't change a single word to our guidance.
Okay. If I can, just the last one on the net debt. What more is it going to take for consensus to finally grasp the fact that the net debt is going to be much higher than where consensus stands at around EUR 13 billion? How much more effort do you need to put into it to reset consensus expectations?
Yeah, that's a very good point, Nicolas. Thank you very much. Thank you to warn that. I didn't have to do that by myself. That's a very good point. Yes, net debt, logically, when you see at the end of September, yes, net debt should increase by year-end. Thank you to have raised this good point.
consensus is very tight for the end of the year. There's only one point which sticks out completely, that's net debt. I'm just wondering.
And, sometimes a part of the consensus, maybe is a bit lagging behind in terms of integration of M&A or M&A base. That's why.
Okay. Fair point. Thanks, [Grégoire].
Bye-bye, Nicolas.
Thank you. The next question is from Olivia Peters of Macquarie. Please go ahead.
Hi, good evening, everyone. I just have a couple of questions, please. Firstly, I'm quite surprised that you're saying that oil and gas activity hasn't picked up. It seems that it has for some of your peers, and I'm wondering if that is due to where you're located geographically or if there's another reason for that. Secondly, on Vinci Construction. I understand that you're being selective, but are you seeing any improvement in the pricing environment in France? You've alluded to things like building material prices, and I'm wondering if construction contract pricing is going more favorably. Just going back to the consensus, and sorry to labor the point. Basically, I agree with Grégoire that there is pretty much no growth factored into the consensus for the second half. Is that something that you would expect or something that, given the results this evening, you believe will change?
Is the consensus factoring in the M&A that you've been doing or not? If you could clarify that would be very helpful. Thank you.
Thank you. We are going to answer you in one minute, Olivia. Yes, Olivia.
Yeah. Hi.
Yeah. I will start by the end. Point number three. Again, now the guidance is on an annual basis. We don't comment on especially that sales dedicated, let's say, to mostly dedicated to activity, broadly speaking. Second question on VINCI Construction, the pricing environment in France, that's quite difficult to comment on. There are so many markets. It depends on the market, can depend on some project, on the region. No comments. Sorry about that. Oil and gas, you're probably right. Maybe compared to some of our competitors, that's maybe the geo mix, which makes the difference.
It's got nothing to do with where you're located?
Yeah. It depends on the countries where we are. It depends on the specific situation.
Just on the third question, I'm not asking you to change your guidance, just is consensus factoring in the majority of the M&A that you've done this year or not, in your view?
It's a follow-up to the question of Nicolas. Probably the financial investment we have done and we could make this year are not yet in this consensus.
Okay. All right. Thank you very much.
No worries. Bye-bye.
Bye.
Thank you. The last question is from Marcin Wojtal of Bank of America Merrill Lynch.
Hi, yes. Thank you for taking my question.
Yes
Grég. A very quick one on the motorway stimulus plan, the EUR 385 million of CapEx that you mentioned in the release. Can you remind us, the amount of tariff increases that you will be getting from 2019 to 2021 per annum? Also in terms of the investment, over how many years will you be deploying that CapEx that is mentioned?
I could. Marcin, thank you for your question. Have in mind that we speak about what we could call the small motorway stimulus plan, which had been decided by the former president, François Hollande, in July 2016.
Cofiroute decree has been published at the end of August, the approvals on ASF and Escota are still pending. We are waiting for the final green light of the Council of State, Conseil d'Etat in French, and that's probably in the coming weeks. All in all, what can I tell you? In total, VINCI Autoroutes, with some local authorities, will invest an additional EUR 385 million, 3-8-5, in the coming years. It will be probably spread, I don't know, in three, four, five years. This CapEx, that's true, will be remunerated by an additional tariff increase between 2019 and 2021. For ASF Escota, since we are still waiting for the final authorization of Conseil d'Etat, I will not comment. For Cofiroute, that's fine. That's okay.
CapEx are around EUR 160 million, and the tariff increase will be slightly below 0.2%, exactly 0.195% per year between 2019 and 2021. It has been published in the Journal officiel de la République.
Okay. If I can have a follow-up, so of the EUR 385 million of total CapEx, how much actually will be funded by Vinci and how much is a subsidy from municipalities?
I don't answer the question because I don't have the exact information, to be frank. I prefer not to answer.
Okay. Thank you.
Thank you. We have no further questions this evening.
Okay. If it's the end, thank you everybody for your attention. The investor relation team remains at your entire disposal, and should you have more questions, feel free to call us whenever you want, and we always try to answer. Not in the blackout period, of course, but we do our best. Finally, we look forward to welcoming you the 20th and the 21st of November in Marseille for Capital Markets Day, Eurovia. Have a great evening. Bye-bye, everybody.
Ladies and gentlemen, thank you for your attendance. This call is being concluded. You may now disconnect.