Ladies and gentlemen, welcome to the Bouygues nine- month 2021 results conference call. I will now hand over to Karine Adam, Head of Bouygues Investor Relations. Please go ahead.
Thank you. Good morning, ladies and gentlemen. I would like to remind everyone that you can find on the company website at www.bouygues.com the earnings press release, the presentation we will be commenting on during this conference call, an Excel file with historical key figures for the group energy business, and the company's financial statements. Statements made on this call are forward-looking statements. Such statements which are subjective that are based on management's current expectations or estimates and are subject to a number of factors and assumptions that could cause actual figures to differ materially from those described in the forward-looking statements. I will now turn the call over to Pascal Grangé, Deputy CEO and CFO of Bouygues.
Thank you, Karine. Good morning to all of you, and thank you for joining us to discuss Bouygues nine- month 2021 results. With me in the room is Christian Lecoq, CFO of Bouygues Telecom. Following our comments, we will be answering your questions. Let me discuss the main highlights for the first nine months results as shown on slide four. First, in line with the first half of 2021, the group's results over the first nine months showed strong improvement on a return to their pre-crisis level, which is very good news. Second, the group generated a strong free cash flow, and its financial structure remained very solid. Third, in an environment which continues to be uncertain, the group confirms its outlook for 2021, which has already been revised upwards in H1.
Finally, you know that we are very enthusiastic as we signed a purchase agreement with ENGIE to acquire Equans for an enterprise value of EUR 6.7 billion. Following your feedback after our conference call on Equans last week, I want to clarify a few points. We perfectly understand that the situation is not ideal for you regarding the information we can give on Equans. However, we have committed to ENGIE not to disclose any figures on Equans until the closing date. We must respect this confidentiality, and unfortunately, this uncomfortable situation will last a few months. I want to be very clear. We had access to all necessary data during the due diligence process in order to make our binding offer. Based on what we have learned, we are convinced that we will be able to improve Equans margin to best-in-class level.
The results of the operational efficiency plan deployed over the last two years at Bouygues Energies & Services has proved it quarter after quarter. At closing, we'll be able to communicate a roadmap on intermediate objectives. In the meantime, I must ask you to be patient. Let us now turn to the group's key figures on slide five to review this good performance in more detail. Group sales for the first nine months of 2021 reached their pre-crisis level at EUR 27.5 billion. Compared to the same period of last year, they are up 10% with all our business segments delivering growth. The growth was stronger in France and in international markets as French activity was impacted by a strict lockdown from mid-March 2020 before recovering gradually.
Nine months 2021 current operating profit improved by EUR 23 million compared to the first nine months of 2019, thanks to improved profitability at TF1 and Colas on higher volumes and ABPU at Bouygues Telecom. At 4.1% current operating margin is back to its nine months 2019 level. We are therefore well on track to achieve our guidance for the full-year. Net result attributable to the group for the first nine months of 2021 is much higher than one year ago and slightly below nine months 2019, notably due to lower contribution from Alstom. Finally, the group generated EUR 805 million free cash flow. This level of free cash flow is well above nine months 2020 and nine months 2019, excluding Alstom's dividends in 2019 which amounted to EUR 341 million.
Let us now move on to slide six that highlights the group's strong financial position. At end September 2021, net debt was EUR 2.6 billion, which is a historical low for a nine-month period. Compared to at September last year, net debt was down EUR 1 billion, a significant reduction. The strong cash generated by the operations of EUR 1.1 billion on the disposal of Alstom's share capital for a total of EUR 1.4 billion more than covered both the acquisition of BTBD for roughly EUR 800 million and the payment of dividends for EUR 738 million. Net gearing decreased by 10 points over the same period to 22%, reflecting that very strong situation.
Last, after the announcement of the purchase agreement with ENGIE to acquire Equans, credit agencies Moody's and Standard & Poor's issued press releases on the tenth of November regarding the group's rating. Moody's rating is maintained at A3 with a stable outlook. Standard & Poor's rating is A- with credit watch negative. These ratings reflect the sound financial profile of the group. Moving to slide seven, available cash was at the high level of EUR 12 billion compared to EUR 10.1 billion one year ago. It included EUR 4 billion in cash and EUR 8 billion of undrawn medium- and long-term credit facilities with no covenants. As you can see, the debt maturity schedule is well-balanced with no debt at all.
Please note that this maturity schedule does not yet include the issuance of EUR 800 million of bonds at the end of October with a coupon of 0.5% held in anticipation of the reimbursement of the same amount scheduled in February 2022. As such, the group relies on the particularly strong financial position, which remains a major asset to strengthen its business segments and accelerate their growth, notably in the context of Equans. Let's now turn to slide 8 to see the net debt evolution between end of December 2020 and end September 2021. You can observe that the moderate EUR 656 million, sorry, increase in net debt since the end of last year is mostly explained by the following four items.
First, the positive impact of EUR 984 million of proceeds net of fees from the sale of Alstom shares in March and June 2021. Second, an outflow of EUR 66 million related to share buybacks, which more than covered the exercise of stock options for EUR 51 million. Third, an outflow of EUR 738 million related to the payment of dividends. Four, an outflow of EUR 853 million from operations increased by EUR 126 million year-on-year that I will explain on the next slide. As you can see, we also included the nine-month 2019 figures to assess the evolution compared to a standard year.
Turning to the breakdown of operations for the nine months 2021 on slide nine, you can notice that, first, net cash flow, including leases, lease expenses, increased by roughly EUR 600 million, a significant improvement reflecting the increased activity in all businesses. This level is also higher than in nine months 2019. Second, net CapEx was up EUR 334 million, mainly due to Bouygues Telecom in line with its strategy of rolling out 5G fiber networks, enhancing network quality. Third, as you can see on the chart, working capital requirements related to operating activities increased by around EUR 390 million compared to the same period of last year, reflecting the stronger level of activity. Compared to nine months 2019, working capital requirement is at a lower level, demonstrating the efforts made by all business segments.
I will now turn to the review of operations, starting with the construction businesses. Let's begin with the backlog in the construction businesses on slide 12. At EUR 31.8 billion, the overall backlog at end September 2021 was at a high level, providing good visibility on future activity. The share of the order book in international markets was up two points year-on-year, representing 64% of the backlog at Bouygues Construction and Colas. With new contracts won in third quarter shown on the right side of the slide. For example, Colas won three road contracts in Ontario for EUR 126 million. Furthermore, Bouygues Construction won a contract for the building of a student housing project for EUR 194 million in Essex in the United Kingdom. Let's now look at some details by business segment on slide 13.
As you can see, the momentum at Colas remains strong. The backlog reached the very high level of EUR 9.6 billion, up 4% year-on-year, driven by strong international business momentum. Indeed, at end September, the international backlog increased year-on-year by 9%. The decline in Bouygues Construction's backlog reflects a high basis of comparison related to the very low backlog drawdown during the lockdowns period and the award of a number of major projects in the first half of 2020. Moreover, there was a lower volume of significant deals processed in 2021. We believe volume should be higher in 2022. At Bouygues Immobilier, the dynamic in residential reservations remained strong, up 13% year-on-year in nine months 2021, reflecting solid customer demand. The volume of building permits submitted also improved compared to nine months 2020, providing good prospects for future activity.
However, delays in obtaining building permits are still very long, and we therefore have a lower supply of available units. Regarding commercial activity, clients are in a wait-and-see mode, and as a result, the backlog was down 15% year-over-year. Let's now look at the construction activities key figure on slide 14. Sales and results showed strong improvement compared to nine months 2020, which was significantly affected by the pandemic. Compared to the nine months of 2019, results for the construction activities are close to their pre-crisis level. Overall sales are still down by 5% due to a high comparison base. Let me remind you that France experienced a high level of activity in 2019, one year before the municipal elections. At EUR 550 million at end September of 2021, current operating profit is close to the figures of end September 2019.
Current operating margin returned to the levels of the first nine months of 2019 at 2.5%. It benefited from the improved profitability of Colas, with a current operating margin of 2.4% compared to 2.2% in the first nine months of 2019. Bouygues Energies & Services margin has also improved over the same period from 1.8% to 2.4% for the first nine months 2021, thanks to the operational efficiency plan implemented two years ago. Now, let's talk briefly about TF1's results on slide 16, which were released at the end of October. TF1 released a very good set of results, which showed a strong improvement year-on-year compared to nine months 2019. Sales were up 21% compared to nine months 2020 and up 2% compared to nine months 2019.
They benefited from, first, a strong momentum in TV and spending, even though third quarter 2020 was a tough basis of comparison. Second, the good performance of Newen production activities. Current operating profit of EUR 223 million showed a significant increase both versus nine months 2020 and nine months 2019. As a result, current operating margin rose significantly by 4.3 points to 13.5%. In this context, TF1 revised upwards its full-year guidance and now expects its 2021 current operating margin to be above 12%. Now, let me turn the call over to Christian Lecoq.
Thank you, Pascal, and good morning, everyone. Starting with slide 18, you can see that Bouygues Telecom's commercial momentum in mobile continued during the first nine months of the year. At end September 2021, Bouygues Telecom had 14.6 million mobile plan customers, including M12, following the integration of 2.1 million B2B customers and the gain of 436,000 new customers since the beginning of the year. Thanks to this performance, Bouygues Telecom almost achieved 2/3 of its Ambition 2026 targets to win four million additional mobile customers excluding M12. Now, let us turn our attention to our fixed customer base on slide 19. As you can see, the total fixed customer base is 4.4 million at end September 2021, up 104,000 customers in the first nine months of 2021, driven by FTTH.
The FTTH customer base reached 2.1 million at the end of September 2021, thanks to the addition of 417,000 new customers since the beginning of the year. Almost half of the fixed line customers now have an FTTH offer compared with 34% a year earlier. The FTTH rollout is also accelerating. At the end of September 2021, the number of FTTH connections marketed reached 22.5 million, in line with the objectives of the Ambition 2026 strategic plan. In PIN areas, the number of FTTH connections doubled compared to end December 2020, reflecting the acceleration of deployment. Here again, we remain on track to deliver our goal of three million additional FTTH customers by end 2026. I want to stress that this increased volume is not detrimental to ABPU.
Indeed, as shown on slide 20, our more for more strategy continues to bear fruit. Mobile ABPU and fixed ABPU were up year on year in the first nine months of 2021. Mobile ABPU increased by EUR 0.3 to EUR 20.6, restated for the roaming impact, and fixed ABPU increased by EUR 0.1 to EUR 28.2. On a sequential basis, both mobile ABPU and fixed ABPU were up compared to the second quarter of 2021, with respectively EUR 0.2 and EUR 0.4. As expected, fixed ABPU was back to growth in this third quarter, which is good news. Please do keep in mind that the ABPU figures on this slide do not include B2B.
This growth in both volume and ABPU resulted in a solid top line growth in the first nine months 2021, as illustrated on slide 21. Total sales was strong and up 13% year-on-year in the first nine months 2021. Sales from services were up 14% over the period of 5% excluding B2B. This performance was achieved both through mobile revenue, which was up 17% including B2B, and through fixed revenue, which grew 8%. Total sales increased by 7%, a performance boosted by the increase in handset sales over the period. EBITDA rose for the first nine months increased by 7% year-on-year at EUR 1.2 billion, a performance in line with our full-year targets.
The EBITDA margin was down as expected, reflecting the dilutive impact from the B2B integration and a mix effect related to the FTTH ramp-up, notably PIN areas. Operating profit was higher than one year ago at EUR 531 million, thanks to a non-current income of EUR 107 million, essentially related to the disposal of data centers. Finally, I would like to say that net CapEx was up compared to the nine months of 2020 at EUR 878 million, which is also consistent with our annual targets. Lastly, I would like to conclude that we confirm our 2021 outcomes. Now, I'm pleased to hand over the floor to Pascal.
Thank you, Christian. I would like to briefly comment on the financial statements on slide 23. We have already discussed revenues and current operating profits at the beginning of this call. Other operating income and expenses were positive at EUR 90 million in the first nine months. It notably included non-current income of EUR 107 million at Bouygues Telecom, as Christian explained, a EUR -6 million at Bouygues Immobilier related to adaptation measures, and last, expenses related to M&A projects at TF1 and at the holding level. You can also note that the cost of debt decreased slightly year-on-year, thanks to lower interest charges and a lower amount of debt.
Regarding the income tax line, we have the effective tax rate was 31% in the first nine months 2021, very close to normative level. The share of net profit of joint ventures and associates was EUR 202 million. It included the contribution of Unify, which was partially offset by losses at Salto at TF1 level, as well as SDAIF at Bouygues Telecom level as expected. We will now turn our attention to the group outlook on slide 25. Based on its nine months 2021 results, the group is confirming its outlook. In 2021, sales and current operating profit should be very close to the 2019 level, and current operating margin should return to its pre-crisis level. In 2022, current operating profit should continue to grow and exceed the 2019 level. This concludes our presentation. Thank you for your attention. Operator, please open the floor for questions.
Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. As a reminder to our participants, please limit yourself to two questions. The first question comes from the line of Nicolas Cote-Colisson with HSBC. Please go ahead.
Oh, thank you. I will start with Equans. Because I would like to understand why you can't communicate more, given ENGIE has published some details the day after your conference call. Is it because their revenue or EBIT definition is not comparable to yours? I would like to have a bit more color on that. Maybe the second question is on telecoms and pricing. The ABPU is up. Can you help us with the different triggers there? What's the contribution from back book repricing in particular? Any color on the market pricing dynamics would be very helpful. Thank you.
As far as Equans is concerned, effectively, we are contractually committed not to communicate figures about Equans before closing. Without having a high level of churn, but we are doing that very, very careful.
Very clear. Thank you.
The next question comes from the line of Eric Lemarié from Bryan Garnier & Co. Please go ahead.
Yes. Good morning. Thanks for taking my questions. I've got two. The first one, regarding Colas, in the press release this morning, you mentioned the 4% guidance for the operating margin, the current operating margin for Colas for by 2023. Could you maybe give us or remind us your objective of current operating margin for the two other divisions, with Construction and with Immobilier, maybe for 2023 as well, please. The second question on Bouygues Energies & Services, could you please share with us the current operating margin in Q3 for Bouygues Energies & Services or maybe for the nine months, please? Thank you.
As our profitability guidance for Bouygues Construction, we aim on the medium-term to have the normative level, which is around 3%-3.5%. Secondly, your question was related to the Bouygues Energies & Services margin. No, sorry, I didn't speak about Bouygues Immobilier first. On Bouygues Immobilier, we aim on the medium term, but it won't be in the next two years. In the medium term, we imagine to have a margin which will be normative at 6% approximately. Now for your second question, the operating margin for the nine months of 2021 is, I have to check what is the figure for the nine months. 2.24% for the nine months this year for Bouygues Energies & Services.
Thank you very much indeed.
Next question.
On 2.7% on the for the Q3.
Okay. Thank you.
The next question comes from the line of Mathieu Robilliard from Barclays. Please go ahead.
Yes, good morning. I had a question about the free cash flow generation. As you show in your slides, with a very strong progression of the free cash flow. My understanding is that this is without the working capital requirement, which has been a drag year- to- date, as it is usual. I was wondering if for Q4, we should expect again, as we saw in Q4 last year, a big improvement in the working capital requirement contribution. That's the first question.
Yeah. In fact, you know, in our construction businesses, we are used to have a very important swing quarter after quarter on this working capital requirement. Let's say that we achieved a very good level of w orking capital requirement end of 2020. We were thinking that probably we will have in the first half of the next year or this year a kind of regularization of that. There is two good news. We didn't see that phenomena during the first half of the year and in the first nine months of this year, and that's good news. We will have a good last quarter because it's a seasonality effect. Yes, we will have an improvement of that working capital requirement during the last quarter of this year.
Is it conceivable that because excluding working capital, the trends are better, that you could deliver a better free cash flow generation, including working capital for the full-year in 2021 versus 2020, or is it too early to tell?
Yes, we imagine that before working capital requirement, the cash flow, the free cash flow will be higher than the one we had in 2020.
Mm-hmm.
We don't give any forecast for the working capital requirement. As you know, in our construction businesses, some inflows could be in one year or in the year or later. It's impossible to monitor with such a level of precision.
Understood. On telecoms, as we know, Iliad is making a bigger push on the bundled products on mobile handsets and service revenue. I was wondering if you saw any impact there. Lastly, if I may, in terms of your distribution, obviously you've now extended your distribution through the agreement with CIC Crédit Mutuel, and I was wondering if you are also pushing harder in terms of your own stores this year and what we should expect in the coming quarters on that front.
First of all, Iliad, we didn't see any impact of Iliad's new offer either in the B2B business or the B2C. What is good for us, I think that Iliad has now the same strategy as us, so they try to increase their ABPU mainly by moving their clients from the EUR 0-EUR 2 offer to EUR 10 or EUR 20 offer. I knew also that when Iliad said that they didn't increase prices for 5G, for example, the 5G is including in their offer only in the EUR 20 offer. If you want a 5G offer with Iliad you have to pay EUR 20 and not EUR 2 or EUR 10 or such.
It's a way for them to move their clients to higher prices and so to increase their ABPU. We are doing exactly the same thing and we think so it is good for us and for the market. Your second question was about CIC. Yes, we have begun to sell Bouygues Telecom's offers in CIC and Crédit Mutuel local branches. You know that before it was only the CIC Mobile and offers and Crédit Mutuel Mobile offers. Now it is the Bouygues Telecom's brand and Bouygues Telecom's offers that are sold by CIC and Crédit Mutuel, which is a good thing. This is the second step of our integration plan.
The first step was to migrate CIC and Crédit Mutuel clients to Bouygues Telecom's mobile network. We have done part of the job. It will continue in 2022 because in some areas we need before the migration to increase the capacity of our mobile network. The second step was the launch of the Bouygues Telecom offers in the local branches. That's done now. The third step will be to migrate BTV clients to Bouygues Telecom's IT system. To do that, we will do that before the end of 2023 because we need three years from the acquisition to do that because we have some job to do before to be able to move the clients from EIT IT system to Bouygues Telecom's one. Yes, to date, it's good, the integration is very on a very good path.
Thank you very much.
The next question comes from the line of Alex Roncier, the Bank of America. Please go ahead.
Hello, guys. Thanks for taking the question. Just one that I would like to come back on CIC and, you know, your new offers underway which I think are named Prompto on the CIC network. What is your strategy regarding the old brands from, you know, EIT? Are you trying, you know, after the migration on your network to also just migrate customers from the former brands? To just Bouygues and maybe try to upsell them at the same time, or are you gonna consider keeping former clients of CIC Mobile and all the other MVNO brands under the former brands? Thank you.
First, as I said before, for new clients now, CIC and Crédit Mutuel are now selling Bouygues Telecom's offers. No more Crédit Mutuel Mobile like you said, the Prompto offer or CIC Mobile offers. At the same time, we keep what we call the brand licenses like NRJ Mobile, Cdiscount Mobile, Auchan Télécom. These brands will continue and we won't change these brands to Bouygues Telecom's offers. Regarding Crédit Mutuel Mobile and CIC Mobile clients, existing clients, as I said, we will move them to Bouygues Telecom's offers and Bouygues Telecom's IT system, information technology system.
To do that, we need between 18 and 24 months from now, so it will be done by the end of 2023. It's a big move that we have to do. It's not as easy as moving from the mobile network that we are doing now, we are doing that now. Moving from one IT system to another IT system is much more complicated.
Okay. Maybe rephrasing my question is more if I'm today like a CIC Mobile customer, will I receive like an email or a text from Bouygues in, you know, let's say, you know, six months or 12 years saying that my current CIC Mobile offer is no longer available and that I'm-
Yeah.
You know, proposed like a new Bouygues offer, and at the same time that you will try to probably, you know, upsell those customers and, you know, incremental for incremental ABPU.
Exactly. Exactly.
Okay.
We will be able of course to try to put in place our more formal strategy like for Bouygues Telecom clients. We will work with CIC and Crédit Mutuel because these clients are also clients of these banks. We have to work together to look at how we will do that.
Okay, perfect. Maybe just one follow-up, if I may. I was seeing on the market recently that Orange was launching or trying to develop new, basically, shops in rural areas, you know, some small shop, very small shop, more localized in smaller areas.
Mm-hmm.
I suppose, you know, that's because fiber obviously is being deployed more and more in rural areas, and you guys are gonna, you know, come and probably disrupt the market given, you know, you currently have a low share in those regions. Are you thinking, you know, still about, you know, trying to expand your distribution network through other agreements? I mean, you've had CIC, you've had other agreements for distribution before. Or are you thinking at some point of going more aggressively and invest more yourself with, you know, Bouygues boutiques instead?
Well, as you said, we already have, I think, more than 500 shops. We now have the CIC Crédit Mutuel commercial network. As Orange did, we are also working on a new concept to be able to maybe develop some very small shops in a very rural area. We have also some-
Okay.
Trucks, we have also some truck like Orange. We are able to like a moving shop, I would say.
Mm-hmm.
There are some trucks that we are able to send in the new areas where we are opening FTTH, for example.
Very clear. Thank you very much.
The next question comes from the line of Jerry Dellis from Jefferies. Please go ahead.
Yes, good morning. Thank you very much for taking my question. Question is about the sensitivity of the construction and road building activities to higher inflation rates enduring into 2022. Could you give us some color, please, on you know, supply chain issues which might be emerging at the moment, and what sort of cost inflation you see within the civil works and road building businesses? And can you be confident that the operating margins in both of these businesses will expand year on year in 2022? Then just a brief clarification, please. You reaffirmed earlier the 3%-3.5% operating margin target for civil works in the medium term. I'd be grateful if you're able to clarify what sort of timescale medium term means for this metric, please. Thank you.
Okay. Starting with your second question, let's say that this target will be for 2023 to reach at least 3%. You are speaking about civil works, but please consider that it is building and civil works. Your second question is related to the cost. Inflation in our cost basis for our construction activities. Let's say that obviously we are facing these difficulties. Increasing prices are related first to inflation, but also related to shortage of certain raw materials or equipment. As far as the shortage, I will start with the shortage to say that obviously it's a constraint for our projects, but we are not facing at the present time to date some difficulties which lead to postponement of completion dates and so on.
It's a kind of disorganization of our team, but on the costs, which are related to that, but we don't have any special issue for completion dates. The penalties, delay penalties, and so on. As far as inflation is concerned, we are facing these difficulties. Let's say that we are covered by different mechanisms. The first one is, for instance, at Colas, we have very short contracts and for this reason, we are able to include in our sale price the cost of this increase of price. Secondly, we have some indexation from Ibaz in main contracts, especially in public contracts.
Therefore, we are able to transfer to our clients these increases in cost. Thirdly, we have for instance at Bouygues Construction, for private contracts, when we sign the contract, we cover in fact a lot of things by subcontracts and so on. We have transferred the risk to our supplier or our subcontractor, so we are transferring the risk. There is a remaining effect for us, and when we price for these contracts, we have always a contingency provision in order to cover things which are not known at the date of signing of the contract. For the moment, in general, we are able to cover this increase in prices in these contingencies. We obviously speak to data. We can imagine that probably we'll have a remaining impact in 2022 related to inflation. We have these four mechanisms in order to mitigate partly at least, mainly, this risk.
Thank you. That's very clear. Just one clarification, please. Is the requirement to sort of pass on higher prices, is that having any perceptible impact on end customer demand at this stage?
No. No, not at this stage.
Thank you very much.
As a reminder, if you would like to ask a question, please press star one. The next question comes from the line of Nawar Cristini from Morgan Stanley. Please go ahead.
Thank you very much. I have a follow-up on the fixed ABPU topic. Just thinking of the mix between the dilutive volume and price increases, how do you see this progressing from here? Do you see a point where fixed ABPU growth could reach a negative territory impacted by the dilutive promotions before maybe rebounding at a later stage as the promotions lapse and of course, the price increases help as well? Secondly, just on prices, I was interested to hear an update on your price increase strategy. Going from here, will you continue to work on various clusters, raising those in turn and then monitoring churn gradually before moving to the next cluster? Or do you see room for a different approach? Any color on this will be helpful. Thank you.
First, regarding ABPU, what’s important to understand is that new clients benefit from a first one-year promotion. It’s not exactly a promotion, it’s the fact that tariff is cheaper during the first year. When you have more new clients, you have a dilutive impact on ABPU. Once this is not the case, of course, it is better for ABPU. Keep in mind that when your growth is higher than it was in the past, for example, you see a dilutive impact on ABPU. That’s what we saw on the 50 ABPU, for example, at the end of 2020 and in Q1 and Q2 of this year.
Because we have the steps in terms of FTTH net adds in the middle of last year. You saw the results in ABPU, but it is not a bad news, I would say. We continue at the same time to work. It's not the effect of promotions of the market. It's only the effect the result.
Of the fact that the French market is organized with first year, I would say half prices, and after that normal prices. It is the same for everybody in the market. Iliad, us, SFR and Orange. In the fixed business and either in a big part of the mobile business also. It is not the effect of I would say marketing promotions or low pricing or level of competition. This is only the structure of the market. This is the first. At the same time, we continue to increase the ABPU for existing clients with our more for more strategy.
Yes, we are working with clusters to monitor the level of churn, and also because each cluster does not need the same service, I would say, in exchange of the price increase. Some clients with B.iG for example with, I don't know, more giga inside the bundle. Some others with B.iG with a new service, for example, and some others with something else. That's what the marketing team is working on, to decide what is the good service for these clients. If the service is good for the clients, the clients will be happy to pay more for this service, and in one chart. This is why we are working with the risk cluster.
Thank you very much. Just to follow up on the fixed ABPU, indeed the promotions I'm mentioning are the first year promotions, which lapse in the second year and you have like also an increase coming from that. My question, I guess, is with that mix, the first year promotion which comes with the embark base on the FTTH side and the back book price increases, do you see this mix bringing the fixed ABPU growth to a negative territory at some point? Or do you think that you will continue to print growth at the fixed ABPU on a quarter-over-quarter basis from here?
In the medium term, if you look at, in the medium term, of course the ABPU will go up. At this moment you have two effects. You have new clients which benefited from the low pricing during the first year, of course. You have also existing clients, existing DSL clients that we are migrating from DSL to FTTH and for these clients, we offer them rebate during the first year. For the moment you have two negative effects. The new clients and the migration of existing clients. In the future as everybody will be on FTTH you will have only new clients. In the future of course, ABPU in the fixed business can only go up.
Keep in mind also that ABPU tariffs are higher than DSL one for the normal level of tariffs. In the medium term of course, ABPU will go up. Now quarter after quarter for 2022 or Q4 2021, I don't know because it will depend on how good we are in taking new clients, how good we are to migrating clients. It will depend on the seasonality and many things. It is difficult for me to say to you. I'm sure that the fixed ABPU will increase the next quarter. I don't know. Probably yes, but it will depend on the volume.
Okay. That's helpful. Thank you.
The next question comes from the line of Nicola Gifford from Goldman Sachs. Please go ahead.
Thank you. I just had one follow up on the impact of rising costs specifically for the telecoms business. Can you quantify the sensitivity or impact of inflating lease costs and energy costs specifically in the telco business? Thank you.
About lease costs, we have no impact. We have only long term contract, you know, now with Cellnex, TDF and so on. These contracts are not linked with inflation rates. We have a fixed incremental things for our lease. It is not linked with inflation at all. Regarding energy, we always fix the price of our energy from now to 2024. We won't be impacted by any increase in terms of energy prices from now to 2024. The cost of energy is quite low at Bouygues Telecom. Quite low. It's around 1% of the turnover now. It's not as high as in other activities.
Great. Thank you.
The next question comes from the line of Nicolas Mora of Morgan Stanley. Please go ahead.
Yes. Good morning, gentlemen. First question on Colas please. The margin in the third quarter was maybe a little bit, you know, what we would've expected after a very strong start to the year. Colas seems in their press release to a slightly less favorable weather in the U.S. I mean, is there anything else that you can pinpoint to in terms of margin which was below 8% in Q3? We've seen in 2018 or 2019, for example, that the margins could have gone up to close to 9%. Second question is just on the order intake, and you're talking about the expectations of contracts coming through in Q4. I mean, we are halfway there, still not much announced.
Can you help us understand a little bit where you expect or what kind of large contracts you expect to be booked, either at Colas or Bouygues Construction? Last point on Bouygues Energies & Services. A few years back, you gave a margin target for this year at around 3.5%. I think we're gonna fall short of this. Can you help us understand what we should expect from here? I mean, you said 2.4% EBIT margin at nine months 2021. What are the next milestones, let's say, and step change in these margins into next year and 2023, please?
Considering your last question, we mention for Energies & Services that we expect for next year margin slightly above 3% for 2022. Considering the reasons for the improvement we are expecting in our margin for Energies & Services, and we confirm it. Now the pace of that improvement is notably related to the COVID crisis, which is not yet totally behind us. Your second question was related to a contract we are expecting in the future for Colas.
It's probably in the real activity that we will have some good news to announce in the next quarter related to that. Your first question was related to Colas and the level of margin of Q3. You know, in our construction activities, you can monitor just for a quarter on your margin. We are aligned with the guidance we have issued related to the annual operating margin of Colas slightly, which is increasing year after year. We have said that we will be at a higher level than in 2019, and we confirm that guidance. There is no specific event except the one which I mentioned in the Colas communication. Bad weather in the U.S., for instance.
The next question comes from the line of Sam McHugh of Exane BNP. Please go ahead.
Yeah, morning, guys. I think that's the first time I've heard you mention the contingency provisions as one of the inflation protections. Could you give us a bit of a sense of how big these contingency provisions are relative to contract sizes? On average, what percentage of the provisions you generally find you need to use each year, and then how much of the provisions. Sorry, go on.
We want to communicate on what, how we price our contracts. It could depend on contract to contract, activities by activity. It's impossible to give you some flavor on that, in that respect.
Is it possible to give a flavor of the proportion of contingencies that are being used up for inflation versus, you know, general use of these provisions? Any kind of color would be interesting, just 'cause I haven't heard you talk about it before.
I'm sorry, but we are unable to give you this information, which is confidential.
Okay.
There is no-
Thank you very much.
Well, we have no overconsumption of these contingency provisions.
Okay. Very clear. Thank you.
We currently have no more questions on the line. If you would like to ask a question, please press star one. There are no more questions on the line. I'll hand over to your host to conclude today's call.
Okay. Thank you for joining us today. We'll be announcing our full-year 2021 sales and earnings on 24th of February, 2022. Should you have any question, please contact our Investor Relations team. Their contact information is on the press release on our website. Thank you.
Ladies and gentlemen, this concludes the Bouygues nine-month 2021 results conference call. Thank you for your participation. You may now disconnect.