Earnings Call: Q1 2021

May 20, 2021

Ladies and gentlemen, welcome to First Quarter twenty twenty one Results Conference Call. I'll now hand over to Karine Ador Cuisin, 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 wwwcom 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 and its business and the company's financial statements. Statements made on this call are forward looking statements. Such statements reflect objectives that are based on management's current expectations or estimates and are subject to a number of factors and uncertainties that could cause actual figures to differ materially from those described in the forward looking statements. I will now turn the call over to Olivier Roussard, CEO of Bouygues. Thank you, Karim. Good morning to all of you, and thank you for joining us to discuss the Bouygues first quarter twenty twenty one results. With me in the room today are: Pascal Grange, Deputy CEO and CFO of Bouygues and Christian LeCocque, CFO of Bouygues Telecom. Following our comments, we will be answering your questions. Let's begin with Slide four. Q1 twenty twenty one results reflected a solid start to the year with a sharp improvement compared to the Q1 twenty twenty. This Q1 twenty twenty was negatively impacted by the beginning of the pandemic. As usual, given the nature of our activities, especially the road activity, Q1 was impacted by seasonality. Let me stress the main highlights for this quarter. First, we experienced a significant growth in group sales compared to Q1 twenty twenty. Second, the group current operating results and margin were close to Q1 twenty nineteen. Third, net profit attributable to the group was positive, which is quite unusual considering the seasonality of the business. Fourth, our financial structure remains very robust. And lastly, based on Q1 results, Bouygues Telecom is able to revise towards its EBITDA absolute target for the full year. In conclusion, in an environment still uncertain and affected by the pandemic, the group confirmed its outlook. Let's turn now to the group case figures on Slide five to review more in detail this performance. Group sales were €7,700,000,000 up 7% year on year. The good news for the first quarter is that all our business segments delivered growth compared to Q1 twenty twenty, thanks to solid commercial activity. The growth was particularly strong in France as latter activity was impacted by a strict lockdown from mid March twenty twenty. In International Markets, sales were affected by an unfavorable exchange rate effect. Like for like and at constant exchange rates, revenue was down by only 3%. Current operating results improved by €165,000,000 compared to one year ago. At minus €77,000,000 results were close to Q1 twenty nineteen level, which is a good performance. And finally, it reflects, first, a favorable base effect as Q1 twenty twenty was negatively impacted by the beginning of the lockdown and second, the positive results of ongoing strategic plan and the operational action led by the business segments. Therefore, Q1 twenty twenty one current operating margin sorry, was close to Q1 twenty nineteen level. Operating results improved strongly, benefiting from the solid operational performance and EUR 60,000,000 of noncurrent income at Bouygues Telecom essentially related to the disposal of data center. Finally, at EUR 21,000,000, net profit attributable to the group was positive. It includes a EUR 120,000,000 contribution from Aston, was detailed in our press release published last week. Let's turn to Slide six that highlights the group's strong financial position and now give the floor to Pascal. Thank you, Olivier. At end March twenty twenty one, available cash was at the high level of €11,500,000,000 compared to €10,300,000,000 one year ago. It included €3,600,000,000 in cash and €7,900,000,000 of undrawn medium and long term facilities, of which €7,500,000,000 were without covenants. As you can see, the debt maturity schedule is well balanced with no debt at all. Moving to Slide seven. Net debt was €2,600,000,000 at the March 2021. It is the lowest level for our first quarter in fifteen years. Compared to end March last year, net debt was down €946,000,000 a significant reduction. The strong cash generated by operations of EUR 1,500,000,000.0 covered both the payment of dividends and the acquisition of EIT, which has been renamed Bouygues Telecom Business Distribution and is now referred to as BTBG. Moreover, net debt benefited from the positive impact of the disposal of Alistair's share capital in November 2020 and March 2021 for a total of EUR0.9 billion. Net gearing decreased by nine points over the same period to 22%. Compared to end December twenty twenty, the increase in net debt is moderate €662,000,000 as the usual seasonality effects were partially offset by an improvement in operations. The group relies on a particularly strong financial position, which remains a major asset to strengthen its business segments and accelerate their growth over the next few years. Let's now turn to Slide eight to see the net debt evolution between end December twenty twenty and end March twenty twenty one. You can observe that the moderate increase in net debt since at the end of last year is mostly explained by the two following items: first, the positive impact of €492,000,000 of proceeds net of fees, from the sale of 12,000,000 Alstom shares in March and second, an outflow of €1,100,000,000 from operations decreasing by €189,000,000 year on year that I will explain on the next slide. Turning to the breakdown of operations for the first quarter twenty twenty one on Slide nine, you can observe that. First, net debt net cash flow, including lease expenses, increased by 179,000,000 year on year, a significant improvement reflecting the increase in activity in all businesses. This level is even better than in Q1 twenty nineteen. Second, net CapEx was down €110,000,000 mainly due to higher disposals in the first quarter at Bouygues Telecom related to data centers. And third, you can see on the chart that working capital requirements relating to operating activities increased by around €80,000,000 compared to the same period of last year. I would like to stress that the management of working capital by the business segments in 2020 was remarkable. We started the year with the working capital requirement already optimized and with stronger activity than one year ago, to date, we do not observe any slippage. 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 €33,400,000,000 the overall backlog at end March twenty twenty one was up 2% at constant exchange rates and excluding the main disposals and acquisitions compared to the same period of last year. It also remained at a high level compared to the last six years. The share of order book in international markets is stable year on year, representing 62% of the backlog at Bouygues Construction and Colas. Let's now look at the backlogs by geography on Slide 13. As you can see, the International Markets remained dynamic with a 4% increase in backlog at end March year on year at constant exchange rates and excluding the main disposals and acquisitions. Colas has notably won significant contracts in the Road sector in West Africa and Eastern Europe. In the Greater London region, Bouygues Energies and Services was chosen by the operator Virtus to design and build its mega data center in Hays. In France, the backlog was down slightly year on year at end March twenty twenty one. Bouygues Construction's backlog was up 3%, driven by a good commercial dynamic in medium sized projects. The decrease of Colas backlog reflected delays in the public orders due to the pandemic. In Road, order was resumed and in Rail, new orders are expected in the second half of the year. Colas already responded to tenders for the Grand Paris project whose results are expected in the coming months. At Bouygues Immobilier, reservations in the residential rose by 15% compared to last year, reflecting solid customer demand. However, delays in obtaining building permits are still very long due to the pandemic and municipalities' agents working from home. We, therefore, have a lower supply of units available. Regarding commercial activities, clients are in a wait and see mode. As a result, the backlog was down 12% year on year. Let's now look at the Construction activities key figures on Slide 14. The Construction businesses started 2021 on a strong note. Activity was up 6% like for like and at constant exchange rates, driven by all business segments. In France, revenue was up 16%, partly reflecting a favorable comparison effect of the lockdown, which began mid March last year, led to the closure of most of our work sites. In addition, we benefited from a steady demand in residential and the good activity in roads in March. This level of activity is close to the one we had in 2019. Like for like and at constant exchange rates, international sales were down only three percent. The last activity, particularly in Central Europe and in The United States, was impacted by unfavorable weather conditions in the first quarter. The profitability improved significantly compared to Q1 twenty twenty. Current operating results increased by €155,000,000 and current operating margin was minus 3.5% at the level of Q1 twenty nineteen. This was led by: first, an increase in margin at Bouygues Energies and Services compared to Q1 twenty nineteen second, better progress at work sites at Bouygues Immobilier and third, an earlier start of Colas activity in Canada and the positive results of the ongoing strategic plan, including notably the organization in France and the optimization of industrial activities. Please remember that like every year, Q1 earnings are not indicative of first half and full year results due to the usual effect of the similarity. Looking ahead, our construction businesses have promising growth prospects as the essential needs of housing, energy and transportation remain intact. Moreover, our businesses will benefit from the stimulus plans announced in the country in which they operate. Let's have a brief look at those plans across the world on Slide 15. We have already shown you this map, which represents the percentage of sales of our construction businesses by region in 2020 and the underlying Seamless plans that have been announced for each of them. We updated the charge with the $2,300,000,000,000 plan recently announced in The United States by President Joe Biden. This new plan would incorporate $621,000,000,000 for transportation infrastructure, notably including the modernization of bridges, highways, roads and public transportation, airport renovation, rail upgrade and ports and waterways improvements. This plan will be financed over fifteen years. It is too early to know precisely what will be approved by Congress, but this plan should bring good opportunities for Colas in The U. S. Bouygues Construction could also benefit from good prospects in building activities and public works as they are developing in the region. The Portuguese Tunnel in the state of Rhode Island illustrates this potential. In Europe, and particularly in France, while there may be some delays, we still expect to see the positive outcomes in H2 twenty twenty one. Now let's talk briefly about TF1 as results were released at the April. We will discuss the proposed merger at the completion of the Q1 twenty twenty one results presentation. First, TF1 released a good set of results, as highlighted on Slide 17. The improvement in sales and current operating profit was driven by all three business segments. In Q1 twenty twenty one, TF1's audience share among key targets improved compared to Q1 twenty twenty, highlighting the attractiveness of the group's TV channels. First quarter advertising revenues were up 1% year on year at €358,000,000 We saw the return of advertising spending in several sectors such as food and retailer. As a whole, sales were up 3% year on year. Performance at Studios and Entertainment was also very good, driven by new wins, which saw revenue boosted by some catch up in predictions originally planned in 2020. Current operating profit showed significant improvement, reaching €57,000,000 in the first quarter, thanks to the good control of broadcasting scheduled costs amounting to €211,000,000 which remained almost stable compared to the first quarter of last year. As a result, current operating margin was up 2.7 points to 11.2%. In this context, TF1 confirms its full year outlook as you can see on Slide 18. As recently announced and in line with its strategy, Newen recently took a controlling stake in Aizen, a leading player in Spanish production. This strategic move is consistent with Nuwen's ambition to grow its activity in international markets by generating a significant part of its 2021 sales outside France and by increasing its backlog with pure player platforms. Moreover, TF1 expects UNIFI to increase its sales and achieve a positive current operating margin in 2021. Please note that this outlook is based on information known to date and excludes any further deterioration due to the pandemic. Now let me turn the call over to Christian Ricotte. Thank you, Pascal, and good morning, everyone. I hope you are all fine and in good health. Starting with Slide 20, you can see that we've achieved a significant step in mobile in the first quarter. At end March twenty twenty one, Bouygues Telecom had 14,300,000 mobile time customers, excluding M2M, following the integration of 2,100,000 B2B customers. Commercial activity remained dynamic during the quarter despite the closure of around two twenty stores due to the health crisis considerations. As a result, Telecom won 141,000 new plan customers in Q1. Thanks to this performance, Bouygues Telecom already achieved 54% of its Ambition 2026 target to reach 4,000,000 additional mobile customers as to its name to end. We are therefore confident in our ability to meet the target. My presentation will also show you that mobile ABPU continue to grow as at same time we expanded our customer base. Now let us turn our attention to our fixed customer base on Slide 21. As you can see, we had 4,300,000 fixed customers at end March twenty twenty one, including 98,000 was in the first quarter. In FTTH, net adds continued to grow at 190,000 customers joined us during the first quarter, With a total of 1,800,000 subscribers FTTH customers represented 42% of our fixed customer base compared to twenty eight percent one year ago. Having achieved 6% of our ambition 2026 target in one quarter, we are on track to deliver our goal of 3,000,000 additional FTTH customers. Once again, I would like to stress that this increase in volume is not detrimental to ABPU. Indeed, as shown on Slide 22, our more foremost strategy is being put. Please keep in mind that the ABPU figures on this slide do not include the BTB. Mobile ABPU and fixed ABPU were up year on year in the 2021. Mobile ABPU increased by €0.6 to €20.2 restated for the roaming impact and fixed ABPU increased by €1.1 to €28.2 This growth in both volume and ABPU resulted in solid top line growth in the 2021 as illustrated on Slide 23. Total sales were strong and up 17% year on year in the 2021. Sales from services were up 13% over the period or 4% excluding BTBD. This performance was achieved both to mobile revenue, which was up 15% including BTBD and through fixed volume, which grew by 9%. Other sales increased by 35%, a strong performance reflecting the acceleration of FTTH connection and the growth in B2C revenues. EBITDA after leases for the first quarter was up 10% year on year at €330,000,000 Performance is better than what we expect for the full year 2021. Please remember that in Q2, we had an unfavorable comparison effect on the after leases coming from two items. First, euros 17,000,000 of capital gain from the disposal of FTTH premises to Zailles and second, euros 20,000,000 of new renewable savings related to the 2020 lockdown. The EBITDA margin was down as expected, reflecting: first, the dilutive impact from the BTBD integration second, a negative roaming impact of around €20,000,000 in the 2021 versus 2020. And third, a mix effect related to the FTTH ramp up notably in medium dust and pin areas. Regarding current operating profit at €76,000,000 I would like to say that it included €6,000,000 of depreciation and amortization of intangible assets acquired from BTBD following the provisional purchase price allocation. Lastly, operating profit was higher than in Q1 twenty twenty at $1,036,000,000 euros thanks to a non current income of €60,000,000 especially related to the disposal of data centers. I now want to add a few words regarding our recent BTBD acquisition on Slide 24. The integration started positively since employees are fully committed, a new senior management team has been put in place and the EIT integration plan is on schedule. BTBT launched its first commercial campaign in March and April and it has been successful as BTB sales performance was higher than one year ago. Meanwhile, the commercial trends remain dynamic for trademark licenses. We initiated the first BTBD customer migration to Bouygues Telecom Networks during the quarter, and we are pleased to have no impact on churn rates. We will continue to migrate BTBD customers slowly and proactively to maintain good service quality. The first switch of customers to book telecom offers will begin by the 2021 twelve months earlier than planned. To summarize, the PTT integration is well on track to success. Let me end with our outlook on Slide 20 '5. Thanks to the performance achieved in the first quarter, Bouygues Telecom raises its EBITDA after release target for the full year and is now expecting an increase of around 7%, including PTBB. Furthermore, Bouygues Telecom confirms its 2021 sales from services and net CapEx objectives. 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 27. We have already discussed first quarter revenues and current operating profit at the beginning of this call. Other operating income and expenses were positive at €56,000,000 in the first quarter. It notably included non current income of €60,000,000 at Bouygues Telecom, as Christian explained already, and the negative EUR 4,000,000 at Bouygues Immobilier related to some adaptation measures. You can also note that cost of net debt decreased slightly year on year due to lower interest expense on our bonds as we reimbursed a bond in July 2020 and issued a new one at a lower rate in April 2020. Regarding the income tax line, the effective tax rate was 20% in the first quarter twenty twenty one compared to 28% last year, in line with a smaller operating loss and a decrease in the French tax rate. The share of net profit of joint ventures and associates was €105,000,000 It included the contribution from Alstom, as explained previously. We will now turn our attention to the group outlook on Slide 29. Olivier, I give you the floor. Thank you, Pascal. I'm on Slide 29. In a macroeconomic and COVID-nineteen crisis context that remains uncertain, the group confirmed its outlook already announced in February 2021. Obviously, this outlook is based on information known to date and exclude any new unfavorable change due to the pandemic. To conclude this presentation, I'd like to come back to the Monday night announcement regarding the merger project between TF1 and M6. Slide 31. As announced three days ago, Bouygues, Airtel Group TF1 and AMTEX have entered into exclusive negotiation to merge the activity of Group TF1 and Group AMTEX to create a major French media player. Bouygues assessed this unique opportunity to reinforce its position in the French media market, which offer long term growth prospects. The new combined group will be strongly positioned to compete on the evolving global media landscape, thanks first, three sixty degree multimedia presence in TV, radio, content production and digital, benefiting from strong brands. Second, the combined entity with pro form a sales of €3,400,000,000 in 2020 and strong investment capacity in content and technology. This entity will strengthen the supply of French quality content and allow the acceleration of the development of a French swimming champion. Merck's company will be a leading player in Europe. Third, this merger will provide an enriched experience for the general public, who will gain an enhanced premium and local content offer and a customized digital experience. Furthermore, advertisers will be offered a wider range of choice benefiting from cutting edge technology in streaming and addressable TV advertising. Lastly, this transaction would result in strong value creation for all shareholders. The annual run rate EBITDA synergy has been estimated between EUR250 EUR350 million. The new entity will would, sorry, therefore, be positioned as a benchmark for the sector. On the Slide 32, we highlight the main steps involved in this transaction. The first step will be a carve out of the activity of Group one hundred six between those related to broadcasting authorization that we call on the slide M6 edition and the rest of the activity that we put in M6 services. We did this due to the French regulation. Because of the French regulation, it's not possible to put in the same entity two channels with an audience, which is over 8% at the nationwide point of view. For this reason, we need to separate the two to create two entity, one for ANSYS and the other entity for the rest of the group. The activity of ANSYS services will merge with TF1 in exchange for new TF1 share based on the merger priority reflecting the overall economic exchange ratio of 2.1 TF1 share for one M6 shares. Following this, Bouygues would acquire an 11 stack of the merged entity from RSA Group for €641,000,000 And finally, RSA Group will contribute its 48 stack in emphasis addition to the combined entities. Following these steps, Bouygues will own around 30% of the merged entity and will have exclusive control over it, acting in concert with Airtel Group as a strategic shareholder. Both Bouygues and Airtel Group are committed to support the combined entity over the long term. This project was unanimously approved by the Board of the four companies. Looking at the financial slide, this operation will be accretive for Bouygues and bring significant value creation potential. Slide 33. As a matter of fact, as you can see on the slide, thanks to the ANSYS Group's high profitability, the current operating margin of the merged entity will have been 30.7% in 2020 on a pro form a basis, higher than the Tier one margin, which was 9.1% in 2020. This transaction will also increase earnings per share. The transaction will have a limited €600,000,000 impact on the net debt before consolidating ANSYS net debt or surplus at closing, and it will not affect our ability to consider other opportunities to reinforce Bouygues in other business segments. Moreover, the value creation potential will be significant into the annual EBITDA synergy. The project is very attractive for Bouygues from both the industrial and financial side. Third, Slide 34. The transaction is subject to the usual condition precedent and more specifically, the approval of the French antitrust authority and the media regulator. Its completion is expected by the 2022. Meanwhile, neither TF1 nor ANSEX will be at risk during this period because it will be business as usual and competition as usual for each entity. Like all industrial and synergistic operation, the transaction is more complex than a simple financial view, but we are very confident in the outcome of the discussion we will have with the antitrust authority and the media regulators that will allow this operation to be completed under satisfactory condition for all stakeholders. This concludes our presentation. Thank you for your attention. Operator, please open the floor for questions. Of course, thank you. The first question comes from the line of Mr. Nicolas Cote Colisson from HSBC. Please go ahead. Hi. Thank you. I'll start with a question on telecoms. I'm interested in your views on equipment supply constraints, you're saying. And also, how do you take the decision from Ilya to eventually enter the premium market? Because both of you are now having high ambitions to become a long term leader behind Orange. So I'm interested in your views on the risks of a resurgence of the price war after almost two years of, I would say, relative peace. And on the construction side, back to your Slide 15 on the stimulus plan, can you help us on the phasing? I was wondering if you could tell us if there are any regions that could materially impact your business as early as 2021? Thank you. Hi, Inkara. So about your first question, I think it's mainly about the trend we saw today on chipset supplies. Today, we have difficulties of chipsetsupply doesn't have any impact for us on the radio network, bit different or, in general, network equipment, I would say, neither on handsets. What we see is that we have more difficulties for set top box and box with two key impacts. The first one is a bit higher prices for these equipments, but very small impact for us, less than €10,000,000 for the year, for example. And the second impact is that we have to anticipate our supply so as to be secure. So today, I think that we have already ordered all our books for the next coming years, so from now to mid of next year. So we are very confident to on this point. So no big deal for us. This is the first point. The second point was about the price possibility of price war in France. That's why that we saw, I would say, more promotional not more promotions in the Q1 of this year. I think it was mainly because the shops were closed. And so we have to add the customers to the digital channel. I imagine two things. The first one is that Bouygues Telecom didn't put in place the first the promotions. During Q1, it was mainly SFR, and we decided to follow as usual. This is the first point. And the second point is that this is very limited promotional promotions limited to the Simonee wedding offers and so no big impact for us. Today, our shops have been reopened today, so today or yesterday. So I think that Q2 will be much better for this point. And about EBI on the subsidy market, well, no comment they used to do that, I think, they have used to do that for now two years, so two years with the refurbished onset. So with you see you saw that in our figures. You see that in our figures. No big impact on our volume neither Thank you. On far as stimulus plans are concerned in the construction businesses, would say that probably in The U. S, it will be next year, but we could expect in Europe and especially in France, first effect during H2 twenty twenty one. So here we in particular for Colas projects, smaller rail projects and probably some cycling roads and so on and so forth. Okay. Thank you very much. Thank you. The next question comes from the line of Mr. Jacob Bluestone from Credit Suisse. Please go ahead. Hi, good morning. Thanks for taking the questions. I had two questions, please. Firstly, I'm interested if you could comment a little bit about your thinking on the balance sheet on the back post the TF1M6 transaction. I appreciate it's quite a late closing, but do you think there's still balance sheet capacity for further acquisition assuming the deal goes through? Or do you still have a sort of slightly under levered balance sheet? Or is it you essentially done? And then secondly, can you perhaps comment a little bit around the margins for Colas? I mean operating profit improved by almost €100,000,000 year on year. I think you had a €75,000,000 COVID drag in last year. So it looks like there's sort of a fairly healthy ex COVID development in Colas. So just interested in what are your expectations around margins for Colas? Do you still expect margins to sort of end up at the twenty nineteen level for this year? Or given the performance in Q1, do you think it could be a little bit better? Okay. For the first question, if you consider our balance sheet, we can consider that we have a very, very low level of debt end of last year, but also end of this year. I remind you that if you cover a one year period, the operational inflows have covered, first, the dividend, secondly, the acquisition of EIT. So the proceeds in to Alstom have improved our net debt from the for the same amount. So it's a good achievement of our operational activities. So you know that we have structured the TF1 and six operation in a way in which we will have a company after merger with a very, very low level of debt and no impact for the consolidated debt of the group, And we will have to disburse €644,000,000 to buy to RTI Group 11% of their stake. So there is a very important room to improve to develop our other businesses. I remind you that we have already said that we consider several fields for development. First, roads for Colas, and we have targeted two in particular three particular regions: Northern Europe, Germany and The UK. And we have Energy and Services in which we want to the third region, sorry, Northern Europe, Germany and Northern America, especially U. S. And we have also targeted Energy and Services in which we consider that we have room for development and improvement in margins. So we have we consider that our balance sheet is sufficiently strong to develop these different projects. The second question was related to Colas margin. You have seen that we had achieved a quite good performance during the 2021. And we are very satisfied about that figure because if you consider the level of activity in 2021 compared to 2019. We are a bit lower, but we have maintained the level of margin, which is a very good news and which, in fact, illustrate the actions we are developing at the Colas in Colas Group in order to optimize some activities, in particular, quarries and bitumen activities and the efforts which have been made to restructure French road activities. So we are quite confident for the year. Frankly speaking, it's very early to know precisely what will be the margin for the current year, but remain optimistic to be not far from the 2019 level, probably not at the level of 2019. But in fact, we have to wait one quarter to see how things develop. If I can just ask a quick follow-up. Just on the M6 transaction, given you expect to retain exclusive control, can we assume that the accounting treatment of CF1 within the Bouygues Group will remain unchanged, so you'll continue to consolidate it? You are perfectly right. We are integrating the whole group on the global method. Okay. Thank you. Thank you. The next question comes from the line of Mr. Eric LeMari from Bryan Garnier. Please go ahead. Yes, good morning. Thanks for taking my question. I've got two. So first one regarding Bouygues Immersion Services. Sales On of Bright by ENGIE in these sectors, do you expect any positive impact on market discipline in terms of pricing after this separation will be done? And second question regarding the new workplace, there is a lot of talks currently, discussion around the new workplace post pandemic, I would say. Do you got some specific offers in the Bouygues Group? I was thinking in particular of Bouygues Immobilier and Bouygues Energy and Services. And maybe it would be nice, if I may, if you can provide the revenues and margin of Bouygues Energy and Services in Q1, please. First, considering Bright, we do not in fact, we do not expect any impact on the market related to this operation. Let's say that, as you know, we have an important action plan in order to recover some better margin at the Bouygues Energy and Services level. And the same, in fact, for the Bright Group because we do consider that they are at a level which could be improved if you compare to their competitors our competitors. So but no market effect of this operation. Secondly, the margin improved. I don't compare the profitability of Q1 twenty twenty one to 2020, as you know, the lockdown last year impacted drastically the margin. But we are on the way of improvement of the profitability of Bouygues Energy and Services from 1.2% in Q1 twenty nineteen to 2.2% at Q1 twenty twenty one. We have set an action plan. It takes time to have the results of that because as I mentioned in different circumstances, we need to change the organization of the company. We have to change the geographical mix of the company, and we have to change the activity mix of the company. We are doing so. We are quite satisfied about our action plan and the results we obtained. The margin is increasing. We intend to reach this year our level, which will be comparable to the average level of margin at Bouygues Construction. This is the first step, and then we will have to reach the level of our competitors. And your third question was related to Workplaces. And you were asking if we had some specific solution to propose to our clients. There are different things to say in that respect. First, we are sure that a lot of companies are actually in wait and see period because they don't know. And we are not in a normal situation. So people are working from home today, but it's due to the pandemic and it's not a long term policy. So we would have to wait. We will adapt our products in order at Bouygues Immobilier level to propose new kind of officers. And we have already our wardrobe activity, which is related to co working places. And obviously, they stopped their activity in a large extent during the last twelve months, but we will consider that we will recover rapidly. You know that the roadshow company is a company which is a cooperation between ACRE and JV between ACRE and Bouygues Immobilier. Thank you. Thank you very much for the answers. Interesting. Thank you. The next question comes from the line of Mr. Jerry Dellis from Jefferies. Please go ahead. Yes. Good morning. Thank you for taking my questions. First question relates to your construction activities. I'd be interested to understand how a more inflationary outlook might impact your cost base, the various elements of your cost base. And what ability you think you might have to pass on higher inflation to customers? Second question Sorry, sorry. Please go ahead. Thank you. Second question was just on the telecom guidance. You've raised the EBITDA guidance obviously this morning, but the revenue target is unchanged. So the reasons behind the EBITDA upgrade would be very interesting, please. And then just finally, on the RTL and CE transaction, I'd be interested to understand, please, how RTL will be compensated for contributing the 48% stake of MC's addition into the merged entity? Thank you. I will start with the inflation question in the construction businesses. Firstly, we have to separate two good construction activity probably on Colas activity because in average, Colas activity are based on short term contracts. So when we submit our offer, we have not very long to wait before realizing the work. So there is no variable inflation issues. When we when there is inflation on some raw materials and so on, we increase our for price. So there is no particular risk in that respect. At Bouygues Construction, the situation is a bit different because the period between the day we submit our offer to the day we are really in the works, we have far longer to wait. And there is, in fact, two particular mechanisms in order to conserve that risk to first, to our clients with formulas. And in some contracts, we have some formulas price index in order to cover that risk. And secondly, when we offer firm prices, then we ask our suppliers firm offers for the equipment and the materials. So this is our strategy. We could so the remaining part of the risk remain more marginal. This is for the inflation. Probably, Christian will answer to Yes. For Bouygues Telecom EBITDA, so the change of guidance means that we'll have €30,000,000 more EBITDA than expected before. The main impact is the fact that the activity integration is better than expected. So means that we have a better level of synergies than we expected before. So this is the main impact. The second impact is the trend in terms of OpEx. We are spending less OpEx, a bit less OpEx than expected and this is the second impact. And the third impact is we could have some small roaming revenue at the end of the year due to vaccination campaign and we expect that the COVID impact could be lower at the end of the year. That is the three main impacts for EBITDA, but the main one is the BTBT synergy. And your third question was related to the structure of M6 TF1 deal and how Airtel Group will be compensated for their 48% stake in M6 addition, that's quite clear. There will be remunerated with TF1 chase. And when we mentioned the 16% stake of Bouygues of Airtel Group, this includes the compensation for their 48% for their participation in M6 edition. Is it clear? That is clearer, but it's still not clear to me the basis on which MC's addition will be valued. Is it possible to shed some light on that, please? No. At that stage, it's too early to give you some details on that. But obviously, all the mechanism has been designed in order to make sure that the level of valuation of MCC Edition will be integrated in the remuneration of Airtel Group. Okay. Thank you very much. Thank you. The next question comes from the line of Mr. Matthew Robira from Barclays. Please go ahead. Yes, good morning. If I start with a question on construction, could you give us a little bit of color in terms of the intake at Colas during the quarter? And also how you now view the quarter that has passed and the outlook compared to maybe your views at the end of last year where you were quite cautious? So that would be the first question. Also on construction, so there was some big order intake in France in the quarter. I may have missed comments on that during your scripted remarks, but should you could give a bit of color there, that would be great. And then lastly on telecoms, you were asked before about the competitive environment and your message is that it is it has deteriorated a bit on the very low end, I guess what you're saying is that it still is solid for the rest of the market. So I wanted to know if you were able to continue to do more for more initiatives on your back book since the beginning of the year and you still think you can do during the rest of the year as you did in 2019 and 2020? Thank you. So I will answer the first question on Telecommunication. Yes, of course, volume to continue our most strategy during the year or the year after. So we already did that during Q1 despite the fact that we had, of course, some commissions on the O end market. So we will continue to do that. As far as your first question is concerned, which is what will be what is the color on commercial activity for Colas during Q1 twenty twenty one, It says that we were obviously a bit anxious at the beginning of the quarter due to the fact that it's quite difficult for sales servants to organize competition and cost of tenders on home. We are quite satisfied about how the situation has been has a good meter during the quarter. Cost of tenders increased by 15 in average has increased by 15% in Q1 twenty twenty one compared to Q1 twenty twenty. But it remains lower than the average level of Q1 twenty nineteen, but we had quite satisfactory last month, I mean, in March. So we are considering new code for bids from municipalities, which are at the beginning of a new electoral cycle, and we consider that we will have an impact positive impact during Q2 and H2. And then we have, in addition, the impact of the stimulus package. So we are quite satisfied about this commercial activity. And I'm very sorry that I have not get your get your second question. Sorry. It was about the order intake on construction in France seems to be a 35% increase. So maybe you explained it during the call before and I missed it. But if you could give us a little bit of color as to why it progressed so well in Construction France? Or in In fact, there is always a bit of volatility in our figures in France for Bouygues Construction as we are considering major or medium sized projects. Let's say that during the first quarter, we had two important projects, which are the real estate renovation project in Boulevard De Capucine, which is quite important, and we have been awarded also for some stations for the Grand Paris. But in general, we can say that we are quite satisfied about the order book in France and the order intake related to medium sized projects. Great. Thank you very much. Thank you. The next question comes from the line of Mr. Josep Bijal from Kepler Cheuvreux. Please go ahead. Yes. Hello, good morning. I have two questions, both on the TF1 and six deal, please. The first one is on the synergies, which are an important part of the deal. Could you help us understand the main areas where you expect the synergies and also the split between the merged entity and the pure channel M6, where those most of those synergies will be? And my second question is about what you mentioned early about these long term commitment of RTL and of course yourselves to support the deal. Could you be more precise about what long term does it mean? How long are they, I would say, engaged in supporting, I would say, this entity? Thank you. Okay. Starting with your second question. Let's say that we have negotiated effectively a long term cooperation agreement, so there is no date for the which is forecasted for them to leave. So it could obviously, they will see. And I think that Thomas Fradler because mostly a question for Thomas Haber explained that in the figure out today, that he is at least committed for a few years. And then after, if the cooperation goes well, he intends to stay. He mentioned that it is that Berto XMain is a group of family owned, which is committed on the long term. So they do not intend to leave. That is for all your first question. And your second question was related to synergies. Most of the synergies are cost synergies, which are related to optimization of stock, utilization of tools and obviously all the program which are booked externally. And this is the main part, and there is a few revenue synergies, which are related to the way we can propose new offers to our clients and to advertisers. Thank you. The next question comes from the line of Anast Nawa Kristine from Morgan Stanley. Please go ahead. Thank you very much for taking my questions. I have two on telecoms, please. Firstly, starting by B2B, following Elliott's launch in March to the SME market. Would love to know if you've seen any impact at the moment. And what you see generally in the marketplace? Have you seen any particular reactions triggered by this interest? So that's the question. And my second question is linked to the subsidized offer. I've seen that in the digital and environmental map that the government published in February, they seem to mention this as a potential mood to try to work on the carbon footprint coming from smartphones. It would be helpful to get your view on this. Do you see any potential risk coming from regulation in the subsidy market? Thank you very much. Right. So about your first question on the EGS and free of the B2B segments, we do not see any impact on the market. As you know, we had offered and I see many of the what we call the pro segments for the small office, home office or very small business and not the smaller medium enterprise. So we do not have any impact today. We already have at the telecom level some offers for this whole segment at quite the same price as Iliad, if you included Iliad offers all what we have already in our offer, like for example, premium services and so on and also the mobile line. And so no impact for us. And in my view that Iliad was probably already present in the post segment via mass market offers like us today. You have many pros that in fact use B2C offers normal B2C offers. So that's point for that. About the subsidy, we do not consider that smartphone subsidies have an impact of the renewable weight of mobile. Today, I think that on the market, more than 75 of the customers can change their handsets today, so are free to change their handset, and they do not that quickly, it seems. So we do not think this has an impact. I remind you also that Bouygues Telecom have a big program in terms of renewable handset. We were the first operator to launch such a program many years ago now. And so we are very happy with this program. And the last point, we are quite surprised that at the same time, the government demands us a five gs network deployment or five gs network rollout, while trying at the same time to slow down the equipment of the customers in new five gs compatible handsets. So good to have a five gs network, but if the people cannot get any five gs handset because five gs handset now, the price is more than about thousand euros So it will be difficult to equip everybody at such a price. So without subsidies, I don't think that it can just have a big five gs effect in France. That's helpful. Thank you. Thank you. Thank you for holding while we expect our next question. We have no further questions. So I'll hand the call back to our speakers to conclude the call for today. Thank you. Thank you, Kate. Thank you for joining us today. We'll be announcing first half twenty twenty one sales and earnings on 08/26/2021. Should you have any question, please contact our Investor Relations team. The contact information is on the press release on our website. Have a good day. Ladies and gentlemen, this concludes Bouygues' first quarter results conference call. Thank you all for your participation. You may now disconnect.