Earnings Call: Q2 2019

Aug 29, 2019

Okay. Ladies and gentlemen, I propose that you take your seats. Thank you. Ladies and gentlemen, it's always a pleasure to welcome you here for our half yearly results. And it's an even greater pleasure as our results are quite encouraging. So what about the highlights for the first half year? First of all, good commercial performance in all three of our sectors of activity: Construction, Telecommunications and Media strong growth in the results of Bouygues Telecom, more about that later on an increase in Q2 current operating profit in the Construction business year on year, I can pass with Q2 twenty eighteen. Also a significant improvement in the group's profitability in the first half year, that's again year on year. And of course, we are confirming our outlook, the outlook that we've already given you guidance on before. Beginning with the group's sales, which totaled EUR 17,446,000,000.000, up 11% over the full year. There's a positive impact of the acquisitions made in 2018, but restated for the main acquisitions and at constant exchange rates, sales still rose 5%. Now one of the landmark events of the first half year or highlights, I should say, is the significant improvement in profitability year on year, in line with the guidance. Now this significant improvement has been driven by the very good performance of Bouygues Telecom but also of TF1 despite the fact that the basis for comparison at Colas was not favorable. You will remember that this time last year, we bought a Canadian company called Miller McAsphalt. Now Miller McAsphalt posted losses of EUR 28,000,000 in January and February of this year. This is because the Canadian market is, as usual, highly seasonal. This is particularly in Canada. This is in roadways in Canada. And of course, in 2018, we didn't consolidate Millermic Asphalt for January and February because we hadn't yet acquired the entity. So the comparison isn't favorable or doesn't stand. So current operating profit up EUR 120,000,000 to EUR $453,000,000 by comparison with the first half year twenty eighteen. The group's current operating margin rose zero five percentage point over the period to 2.6%. Finally, net profitable attributable to the group totaled EUR $225,000,000, down EUR 36,000,000 over the year. This was notably due to the lesser contribution from Alstom. But as you know, last year, Alstom's contribution included a number of exceptional items. Financial structure of the group. Net debt at the June 2019 was up EUR 1,200,000,000.0 year on year. This was mainly due to the acquisitions of Alpiq by Construction and Colas and the acquisitions of Keyyo and Nerim by Bouygues Telecom and at development in Bouygues Telecom's corporate markets. The increase in net debt by comparison with year end 2018 reflects essentially the usual seasonal effects of Colas' business, as I've already mentioned. Net debt at the June 2019 does not include the EUR $341,000,000 dividend paid out by Alstom on the July 17. This is a dividend of EUR 5.5 per share. Finally, concerning our financial structure, the news, which you've probably heard already, is very encouraging. That is Standard and Poor's has upgraded our rating from BBB plus to A- with a stable outlook. All that is very encouraging and, of course, means that we will continue along those same lines. Moody's credit rating of 8.3% was maintained recently. That's it. Now let me give the floor to Olivier Roussard to take you through our review of operations. Olivier, you have the floor. IGNACIO Good morning, everyone. Let us start with the construction business. What you have on this slide is a picture of the harbor the Port Of Calais, which was built by Bouygues Construction. On the right hand side, you have roadwork in Devil's Tower done by Colas. And in the middle, have a new building built by Bouygues Immobilier. It's got a low carbon building. Its building is called Android. It's an office building, low energy building, low carbon building. The first one of its kind, and it's part of our strategy to decarbonize the business. Now looking at the backlog. For Bouygues Construction, we're stable at a high level, 33,800,000,000.0. In France, business is marked by good road activity. You know that in election years, the year prior to municipal elections, the municipalities start public works and projects. And it means that you have an increase a 10% increase in road activity orders, a 10% increase year on year. Around the city of Tours, there's the Beltway. That project is €150,000,000 We again collaged together. In property, Bouygues Immobilier, the backlog is down because of the residential property is down but also because some commercial property projects are not due to start until the end of the year, so there's been a slight delay there. We expect that to happen in Q4 in the fourth quarter, and that will also have an effect on profit margins. Internationally, infrastructure requirements needs remain high. I'm talking of service buildings, especially and both indeed in emerging economies and developed economies. In spite of uncertainty due to Brexit and the international conflict, we find that the backlog is growing well. 60% of the overall order book in Colas and Bouygues Construction was done. Internationally, it was only 57% a year ago, so there's a four point increase there in the international part of that business. If you look at the financial numbers, we decided to zoom in on the issue we find worth mentioning, an €11,000,000 increase in incurred operating profit on Bouygues Construction compared to a decline in the previous half year. That's Bouygues Construction and Colas bringing this improvement, an €11,000,000 improvement between Q2 twenty eighteen and Q2 twenty nineteen. Regarding the rest of the Construction business, as Martin Bouygues said, there's improvement in Bouygues Colas' profitability even though the comparison was not favorable because Colas was only integrated in the March 1. So the first two months, you had well, there's no revenue, only losses, euros 28,000,000,000 this year that we recognized compared to what we had last year, which was nothing because it was not integrated then. Still, profits are up €31,000,000 That's because of significant business mostly in the Mainland France Road, the fact that we disposed of SMAC, and there was a pickup in the rail business, rail activity that started 2018, 2019, and we're having the results right. Now regarding Bouygues Immobilier, we still have a €6,000,000 improvement over one year. Bouygues Immobilier's current operating profit is down. There are two reasons: first, because construction costs cost us 100 basis points, and that's the result of a peak of sales that occurred in 2017. And so that created some tension in the construction business because, of course, you had to find people to build these properties. And then in commercial property, there was a decline because most of the well, the main operations for commercial property are expected to happen in Q4 of this year, so a decrease in that operating profit. Before moving on to TF1, decided to zoom in on our decarbonizing activity in the Construction business. This is becoming more and more relevant. All stakeholders, investors, our customers have taken a keen interest in this. So this is part of our new strategy that we are rolling out gradually. We'll see where we stand, and there are some things that are still in the making. So there are three dimensions to all this. First, we try to bring down the gray energy of materials. That is the energy you require from the extraction to recycling of building materials. Second is to develop energy efficiency solutions or energy or power generation in renewable energies. And number three, to facilitate what is known as decarbonized mobility. So to reduce gray energy in building materials, if you want to reduce the type of what they call the energy you need during the life cycle, you need to choose innovative materials with a low carbon footprint. So there are two aspects here. There's a partnership that we have between Bouygues Construction and Hoffman Green Cement Technologies. We use a concrete whose carbon footprint is 70% to 80% less than the footprint of existing cements, and that will become widespread widespread in 2020, will be fully rolled up in 2020. And the second part, we have the N. JOY building using timber. Timber, of course, is a natural carbon sink. And Bouygues Construction has been working with WWF to make sure we can trace the origins of the timber, the wood that we use. Mean, it's all very well to use wood, but we shouldn't destroy forests unduly to get that wood. So Bouygues Construction and Bouygues Immobilier have an expertise in not only designing this building, but rehabilitating such buildings. And since 02/2005, Bouygues Construction and Bouygues Immobilier have completed as many as 100 timber property development projects, either new or rehabilitated. On the right hand side, you have the so called Sensation Building. It's a high building, high rise building, 100% timber built in Strasbourg. And you've got the BBCA label that is low carbon building. That's what BBCA stands for in French. The second aspect of our approach consists in promoting the circular economy. The construction business, of course, generates lots of waste. 70% of waste is generated by that activity. And so to develop the circular economy, there are four aspects to that. Number one, as I said, we try and select at the designing stage sustainable materials with the lowest possible carbon footprint. You have timber, but you also have the new types of concrete. And the second thing, try to use less materials, and that's you have eco designing. And number three, recycle raw materials such as bitumen or concrete. And by the way, COLAZ managed to recycle 290,000 tons of almost 300,000 tons of bitumen. It's equivalent to the production of a midsized refinery of an annual the annual production of a refinery right there. The second thing is to recycling materials from waste and other projects. And 50,000,000 tons were recycled, and that's the equivalent of 10% of the total output of our quarries. And so that was a huge saving. But it's not just for buildings. We find that the running, the operation of buildings, 40% of the footprint can be due to that throughout the life cycle. For instance, you have air conditioning, lighting and so on and so forth. And we work with our customers to provide energy efficiency or energy efficient solutions so that you can save on energy. And so we work with ambitious and demanding labels, BBCA, the low carbon buildings, but you also work with the B POS buildings, that these are positive energy buildings. So these are buildings that actually generate more power than they use. We now have what is known as BPOS plus so that also includes eco mobility. And we have a specific know how in renovating existing buildings to improve their energy performance while respecting the existing architecture. In some cases, we can change the energy performance while the occupants are there, tenants are still there. 10% of or 13% of the order intake included commitments on energy performance, and we expect to bring that to 70% by 2020. We built also as many as 190 solar farms throughout the world in Asia and in Europe, and so the installed capacity is as much as ten seventy nine megawatts. And that's enough to fuel a city of 430,000 inhabitants or to provide electricity for such a city. And the last aspect is what is known as soft mobility. So of course, there are areas where a lot of energy is spent organizing transportation, and that's a huge cost. Now of course, there's public transportation, and we've been working on tramways with Colas High, and you have bicycle lanes and that sort of thing. But we're also working on new aspects. For instance, when buildings are being designed, there are what are known as ecomobility solutions, and BYES has been is now operating as many as 10,000 charging points for all sorts of electric vehicles. We have a start up company from our own program known as FlexiMove, where you can share electric cars as part of the buildings that we deliver. And that, of course, can bring down the energy bill on transportation. And then we're also working with COLAS towards a more shared mobility. And we have a solution for the Saclay campus called MoveHub, where you can manage car movements and parking. And one last aspect we would like to highlight, and that is Flowell. That's a dynamic road marking solution. You have it on the right hand side of the screen, the pedestrian crossing in Mondelez. It's experimental right now, but we have an agreement with Google on that and a subsidiary called Sidewalk Labs. So it's a subsidiary of the Alphabet Group. And the idea is part of the experiment right now and it's being run by Google in the Casehive smart city in Toronto. Now what's the concept there is that you can change the use of a road using this dynamic road marking process. Now it's a gradual approach. As early as 2018, we joined back the carbon disclosure project A List. That company distinguishes those companies that try hard to address climate change. And we have a few objectives. By 02/1930, Bouygues Immobilier proposes to reduce greenhouse gas emissions by 30% compared with 2017. And Bouygues Construction's commitment is to have a 20% cut by 2030 compared to 2015. And we're working on an objective for Colas, but we'll get back to you about that. Now TF1, Gilles Pelisse produced the numbers on twenty four July, so I'll go through the highlights, but you're already familiar with the numbers. TF1's performance in H1 was good. The audience share is up 0.2 percentage points for women 15 and up 0.4 percentage points for individuals between 25 and 49. Sales are up 6% compared to H1 twenty eighteen. And current operating profit stands at €163,000,000 up 61%. Current operating profit margin stands at 14.2%, up 4.8 percentage points compared to what it was last year. And that is, of course, because we're able to keep programming costs under control. Now for 2019, TF1 is now reiterating its guidance for a double digit current operating margin. Looking now at Bouygues Telecom, the sales performance in H1 twenty nineteen, the momentum was maintained both for the fixed business and mobile phones. Not including machine to machine, we have as many as 11,200,000 mobile plan customers with an additional 280,000 customers in H1, including 132,000 in Q2. Regarding fixed customers, growth is continuing. We have 176,000 new customers, FTTH customers in H1, including 82,000 in Q2, and the penetration rate is improving. We now have as much as 20% of our installed capacity with FTTH compared with 11% a year ago. At thirty one June, we have seven hundred and forty five four hundred and forty five thousand FTTH customers, the total number of customers being 3,800,000. A comment here. Apart from one telecom player, everybody has published their numbers. But I saw this morning a news release. One the last operator has been saying that they are leaders in recruitment in FTTH. Well, let me just remind you one simple fact that, too, when you have a fixed well, you have to look at the number of new customers new subscribers. And then the migration of your base to FTTH, for us, 50% well, most of our competitors are moving their ADSL bases to FTTH, whereas we don't have that problem because most of our customers already opt for FTTH and have it. Any case, while we say that the market is aggressive, we find that in 2019, the market is less aggressive than it was in 2018. We have a good illustration of this. We have two charts, which are a bit unusual maybe. The fixed churn, it's down 17%. And so that reflects, on the one hand, well, better customer retention, customer loyalty and less sort of turbulence on the market. On the right hand side, the planned churn for mobile phones then is down 48%. And so that means, of course, that the market is very stable indeed. Now let's look at the financials. For the last two years, Bouygues Telecom has had an improvement, a significant growth in sales from services, up 8.5% year on year. If you look well, we have mobile sales services and from services and fixed sales from services. There's a difference there. That reflects, of course well, we're developing our base both in fixed and mobile subscriptions, but we're the only ones to publish these indicators. We have what is known as average billing per user. That's what our customers pay on average. And we can find that ABPU over the past few years has been stable at €19.5 for mobile phones, for mobile subscriptions and €26 for fixed contracts. Well, if you have a stable ABPU and a growing base of customers, well, that means that the numbers I mean, arithmetically, the numbers naturally grow. But that indicators has been missing from presentations. I don't see it's pretty easy to work out, and you work out the sales divided by the number of customers. Maybe people haven't got the right calculators, but we can produce these numbers, no problem. Regarding the financials then, the performance has improved considerably. Total sales up 14% at €2,900,000,000 13% only if you restate this from the businesses from KU and Narem. $280,000,000, so we have an operating profit, an improvement of 26,000,000 That includes EUR 50,000,000 of capital gains compared to EUR 91,000,000 last year sales to Cellnex. You have EBITDA after leases up EUR 102,000,000, $653,000,000 compared to $551,000,000 And the margin is 29.3% on EBITDA after leases, up 2.7 percentage points. CapEx is €530,000,000 down €91,000,000 compared to last year. This is because of our strategy we've been rolling out for the past two years past year. Two aspects to that, we try to improve the quality of fixed and mobile networks, but also we try and differentiate the experience delivered to customers. So the quality of networks for us, both in mobile phones, Bouygues Telecom was recognized by RCEP as being the prime operator in rural areas in France. And we're number two on the country overall. That's because the mobile network had 21,028 sites sorry, 21,000 sites, and we expect to bring it to 28,000 sites by 2023. We'll have a target of 12,000,000 FTTH premises marketed by the 2019. That's the quality of the network. But also the customer experience, we're improving there. We have started a program to improve customer experience in 2018. And so you have a number of projects. As many as 200 individual projects were launched, and they are bearing fruit, as it were. On the chart upstairs, you can see customer satisfaction. We ask our customers on a quarterly basis. We have they give us a mark for mobile and another one for fixed. We add up the two out of 200. The average grade score came from 157 to one and sixty one. And of course, our target is 168. That's customer experience. But in customer well, customer experience depends, to a large extent, on their relations with Bouygues Telecom employees. And we like to see how own employees are happy to provide services to our customers. And this is a survey. It's a fully democratic survey. 97% of our customers say they give their best at work. And the second question, people are proud to belong to the company, to work for the company. And 94% of our employees are proud to be part of the company. And you may remember that five years ago, we went through a very difficult time because we had a massive layoff plan where people a voluntary redundancy plan, and that was rather painful five years ago. Any case, now we have beautiful prospects. Regarding the general public, we still have market shares again in less dense areas. In those rural areas, we've profoundly changed the network. We have added an extra 50% in mobile sites. So we are strengthening also the sales network. We have an additional 50 of sales through our partnership with FNAC Connect. We started after our competitors on the fiber part, so we're catching up right there. And so there's also potential gains in the fiber business, and we are quite confident that we will be able to acquire new customers there. We are present in as many as 83 departments and 2,600 municipalities. And wherever we go, we are very well received. And one last aspect is the B2B market that we decided to strengthen that market as well, especially for the fixed line business, especially through the acquisition of Kayo and Nerim. We started off with a low market share in the fixed business, whereas elsewhere, B2B market can be 20% for the mobile business. So if we can make achieve the same performance in fixed as we do in mobiles where we only have a three percent market share, that would be great. So that's about the performance, and I will now give the floor to Philippe Marien for the financial details. Good ladies and gentlemen. Just a few additional comments on interim accounts. So sales up 11%. This has been driven by the acquisition mainly of Alpiq by Colas and Bouygues Construction. On a like for like basis, we still grew sales by 5%, so good growth momentum over all our businesses. Current operating profit, no need to dwell on this. It's already been described sector by sector by Olivier, so up EUR 120,000,000. Net noncurrent items down over the first half year. This decrease was due to the fact that the CELNEX accords have progressed. We have fewer sites sold in 2019 than in 2018. Net cost of debt was stable over the period by comparison with last year. Income tax totaling EUR 132,000,000, which is an effective tax rate, which is well above the effective tax rate we experienced last year. When we were at 20%, we're now up to an effective rate of 36% in the 2019. Two explanations for this increase in the effective rate. First of all, the transformation of the CIC tax credit into a decrease in expenses, which mechanically increases the taxation line. And the second impact is in the breakdown of the group's sales. The proportion of France's contribution is higher than last year. And as you all know, taxes are slightly higher in France than in most other countries in the world. So this dual combined effect increased our taxation in the first half year. Share of net profit of the joint ventures and associates, down EUR 29,000,000 to EUR 59,000,000 in the first half year. The main impact was that of Alstom, whose contribution to our result was the same at the June 30 as the March 31 because Assam only publishes its results twice a year, the March, September. So down from EUR 73,000,000 to EUR 33,000,000. Last year, 73,000,000, of course, was very favorably impacted by the end of the power disposals to General Electric. The fact that it exited various joint ventures meant that its nonrecurring income was quite substantial. So in the first half of this year, we are back to business as usual in Alstom for Alstom in Transport. Very good results, but lower than what we experienced last year. Conversely, we lost EUR 40,000,000 despite the fact that the share of net profit joint venture receipts was minus EUR 29,000,000. The positive impact of TIVCO, which is a contribution that COLAS has or a participation that COLAS has in Thailand, it was affected adversely in the first half year by crude oil importations from Venezuela. Now that didn't happen again in the first half of this year. So TIFCO improved its results and the positive impact for Colas was EUR 12,000,000. So overall, net profit of EUR $225,000,000, down EUR 36,000,000 on first half of last year due mainly to the lesser contribution of Alstom to the group's results. Moving on to the balance sheet, just a few comments. Noncurrent assets were up by EUR $416,000,000. Property, plant and equipment, EUR 151,000,000, mainly at Bouygues Telecom for some EUR 136,000,000. So we are investing substantially at Bouygues Telecom, as we said. We are setting ourselves apart by way of the quality of our network. That is part and parcel of Bouygues Telecom's strategy and, of course, entails investments at a sustained rate. The second important reason for this increase was goodwill. A total increase in goodwill of EUR 170,000,000, mainly due to the impacts of Keogh and Nirham at Bouygues Telecom and Dimension, which is a television production company purchased by Nguyen in the first half year. And of course, the investment in joint ventures and associates rose EUR 47,000,000. This was the outcome of these essentially, outcome under TIVCO minus the dividends received from these two same companies over the period. Now assets held for sale assets and operations held for sale at year end 2018. The EUR $340,000,000 corresponded to the value of the SMAC assets. SMAC was in the process of being sold. That sale was closed in May 2019. So at the June, we had no longer any assets and operations held for sale. Shareholders' equity, the variations are quite typical of this time of year. Net profit plus EUR $297,000,000 dividends, an outflow of $7.00 8,000,000 and capital transactions of minus EUR 28,000,000. These were to buy back shares. This is customary for the middle of the year. We haven't got the full year result yet, but dividends have already been fully paid out. And other comments on an item that changed quite considerably, 1,200,000,000.0 increase in non current liabilities. These are non current financial debt. EUR $562,000,000 at Colas. This is something that recovers every year. Colas draws down its long term facilities, particularly in The U. S, to cover the shortfall in cash. Remember, there's a highly seasonal effect of Colas' business in this part of the world with a very low level of cash in the mid of the year and an improvement in the second half. So that is absolutely customary. What is less customary is particularly under non core debt is Bouygues SA, which, in order to fund the group and the cash for the period, didn't draw down one of its bank facilities as it usually does, but made a significant commercial paper issue of €595,000,000 So these are commercial paper at negative rates of interests even when well negotiated and not too dear. Always too dear, should I say, to you bankers in the room, but facilities are always more expensive. So in our interest, you use this commercial paper and in accounting terms, these are classified under non current debt phenomenon that will be rectified in the second half year because the group's cash requirements are much lower in the second half. We have the same impact on liabilities with regard to SMAC. The EUR $340,000,000 in under our assets held for sale have disappeared, giving us a net debt of EUR 6,200,000,000.0, up almost EUR 2,600,000,000.0 by comparison with the December. So how do we explain this variation? So beginning with the €3,600,000,000 in net cash at the end or net debt, I should say, at the end of the year. Acquisitions in the first half year totaled €170,000,000 mainly Keio and Nerring by Bouygues Telecom and Dumensen at Tier one. This is a far cry from the figure in the 2018, figure of EUR $972,000,000, which was due to the acquisition of Miller McAsphalt by Colas. Capital transactions and others, as we explained earlier on, these mainly share buybacks. The dividend payout, $7.00 8,000,000, I've already explained that when talking about the changes in shareholders' equity and operations, which used up EUR 1,700,000,000.0 in cash. Now this is a structural outflow but higher than the figure we had for the first half last year, $2.27 higher. If we look at operations in greater detail in the first half year, okay, our net cash flow since the introduction of IFRS 16 on the January 1, our bridge chart is more complex than usual Because of the miracle of IFRS 16, we have cash flow which increases very substantially, by the way, since rent is no longer considered as an outflow but an amortization, which of course improves your cash flow quite substantially. This, we feel, is not a true reflection of the economic reality. So we include lease expenses, which was the situation before IFRS 16. This is the real operating cash flow as we see it, which gives us a complex chart. That said, our net cash flow was comparable to last year at €165,000,000 You may say that's comparable because your net cash flow increased with that corresponding cash flow. That's not true, in fact, true at all because net cash flow is measured with taxes paid. Now as far as we're in the middle of the year, taxes paid are in the form of down payments on taxation. Now, just to go back in time, in 2018, we paid tax on the basis of our results in 2017, which, just for the record, were relatively low. So our down payments on taxation were relatively small in 2018. In 2019, we're paying tax on the basis of our performance in 2018, which was much better. So the down payments on taxation are much higher. And the variance between the two down payments, taxation paid, was EUR 92,000,000 to be precise. If you rectify this EUR 92,000,000 impact, here you'll find group cash flow, which is similar or has evolved similarly to our current operating income account operating profit, I should say. So over the half year, our operating profit actually saw our cash situation improve. No comment on net CapEx, same order of magnitude as last year. The change in working capital requirement did, however, deteriorate. Once again, the very substantial amount of cash used up was unusually high, much higher than last year, mainly in the construction sector. The additional outflow was EUR $227,000,000, but we are confident about the fact that this deterioration is temporary and limited to the first half year and that we will be on target for our guidance with the change in working capital requirements, which will be close to zero for the period. That's what I can say regarding our financial statements for the first half year. Thank you for your attention. Thank you, Philippe. And now if I may, a few words of outlook. The outlook, of course, has been confirmed. In 2019, we intend to improve group profitability and generate as much as €300,000,000 in free cash flow at Bouygues Telecom. In two years, we intend to generate €1,000,000,000 in free cash flow for the group as a whole after WCR with contributions for all three sectors. So we're completing H1 in a very satisfactory manner, and we are very confident looking forward to the future. Now by the way, Philippe Marien has just given you a presentation of the financials. And well, like the rest of us, he's gaining a year of age every year. He in a few months' time, he will reach retirement age. And after the presentation of the annual results for 2019, early in 2020, he will step down and Pascal Grange will take his stead. He's been with the company thirty three years. We have a company a tradition in this company to keep people who have their whole career with us. He's well familiar with the construction business and indeed the other businesses of the group, and he will be in a good position to take over from Philippe. Philippe took over from Olivier Poupar Laffarge. Those of you who've been with us for some time may remember him. And I'm sure that Pascal will ensure that he follows in Philippe's footsteps as well. Olivier Roussard has had quite a remarkable career with us. Now he is a VP well, he's the Managing Director of this company standing by me, and he's given an outstanding performance. And there, again, I have every reason to be very happy with him. Now if you have any questions, this is your chance to ask them. Please. Hello. Josep Pujal from Kepler Cheuvreux. I have three questions. Number one, regarding the guidance, 300,000,000 in free cash flow for Bouygues Telecom for 2019. Now in H1, there's been a significant €40,000,000 increase in free cash flow. Why are you so confident that you will be able to meet that objective? You still have to improve even more in H2 than you did in H1 to reach that figure. Second question, Colas Rail. You had concerns about Colas High last year. Could we have sort of take stock? Where do we stand? What's the level of profitability so far? What do you expect for the year as a whole and for next year? Escalas Rail. And then question number three, there's talk of a dearth of a shortage of vitamin. We read about that in the papers late in the French media. Are you concerned? Is there any concern on your side? Right then, on free cash flow, I will ask Richard to say a few words. But that guidance, nobody believed in when we announced it and at the time. Richard? Well, yes, still believe we can meet that target. I do sense some skepticism on your part. But there are seasonal factors between H1 and H2. You have two positive factors on free cash flow on H1. EBITDA gained €100,000,000 or so. The second aspect, and that also helps improve FCF, and that's lower CapEx, capital expenditure down to the tune of about €100,000,000 right there. Now so plus 100,000,000 in EBITDA, minus 100,000,000 in CapEx, so €200,000,000 But you have other seasonal effects. Taxes. Compared with 2018, seasonality was different. So you have an unjustified degradation of tax, but that only happens in H1, 80,000,000 right there. And on the last aspect, and that's disposals, there we have about €70,000,000 So all in all, the €40,000,000 you've got right there is 200,000,000 that is normal and outside phenomenon to the tune of about 150. These are rounded up figures. I can give you the exact figures. It doesn't look like much on H1, but we're confident for the year as a whole. Right. On Colas Rail, Colas Rail, Frederic Gades will give you some details. Yes, well, last year, the performance wasn't so good. We stepped in with a number of new measures. Number one, to reduce exposure to a major client in France. SNCF is a complicated client. So now we do we have other clients, streetcars, tramways, Greater Paris. Another aspect is the freight business. It was not profitable, so we cut that down. And we're moving on to an asset light aspect. That is, we outsource such thing as engines, about 60 of them have been outsourced. So that this year should be more profitable. And we're looking at breaking even next year in France for Colas Rail. Frederic, about vitamin. Vitamin, the shortage, there was a question. There was a shortage. A shortage. Ah, yes. Now there is a tense situation right now. But just as we had last year last year, by the way, we were not as badly hurt as the competition. At least that's what we believe. We fared rather well. We had emergency supply solutions. What we have is framework agreements with suppliers, and we have spot purchase agreements. We expected trouble this year again, so we reinforced the self same measures. And so far, but of course, touch wood, things have been going rather well as regards bitumen in what is a rather tense situation. You should also know that because we are well spread out around the world, bitumen, of course, is something that can be carried from one part of the well to the next. So just because we're short in one part of the world, we can make up for from someplace else. Yes, sir. Mr. Garnier. Eric Lemagne from Bren Garnier, I beg your pardon. A question about France. With local elections in 2020 coming up, what's the effect on the construction business, the road business in particular and property development? A question on BYES. Could you tell us about the performance of Bouygues Energy in service in H2 because this is a very promising company. But on profit margin for 2019 on the construction business, you gave a guidance. You're talking about 100 basis points less for Bouygues Immobilier. You still confirm sticking by that figure, 100 basis points less. Can you give us not so much a guidance on Colas and Bouygues Construction, but can you give us well, the sort of operating margin you're looking at for these businesses in 2019? And then a question on Bouygues Immobilier. Why is there this delay, the fact that the property the commercial property projects have been pushed back? Are customers becoming more demanding? What's going on? Right, says Mr. Briggs. On elections, well, I've been around a while and I've seen elections come and go. That phenomenon what happens is after the elections, you have, of course, new business. During the election period, you have, retention less in terms of delivery of building permits. So we expect that after the elections, as soon as the elections are over, we should get more building permits and new construction sites starting precisely because of that. Now regarding BYES, well, of course, Philippe Ballard will tell you more. Philippe? Right. At the end of H1, we find that BYES well, we will have BYES and other acquisitions. So Energy and Service, we have 2.1% current operating profit, which is an improvement compared with last year. On BYES proper, it is also looking up with operating profit slightly less, but the same order of magnitude as the activity as a whole. Right. And on Bouygues Immobilier, Pascal Minard, who is Head of Bouygues Immobilier, will say a few words. I believe you had three questions. Number one, the market, the effects of the twenty twenty elections. And it is we can feel the effect, and indeed, we've been feeling it for the past six months. When we gave guidance at the beginning of the year, we're looking well, the benchmark was 128,000 sales. That's for property developers. We were looking at a 5% decline. But if you look at the numbers for H1, we're looking at a lower decline, only 1% decline. So we believe that all in all, the market will be slightly down. We're looking maybe at 100,000 to 125,000 units sold. In that self sale market, reservations are down 10%, so further down than the market as a whole. There are two reasons for that. Number one, well, just prior to elections, it's always difficult to start some of our programs, and we're experiencing more difficulties than our customers. And also, when you have block sales, they account for about 30% of our sales at Bouygues Immobilier, and they only accounted for 15% of the sales. So far, we're looking at projects with a few dozens, indeed hundreds of housing units, and these have been postponed to H2. But all in all, for reservations with Bouygues Immobilier, we're looking at a slight decline, and so we expect to maintain our market shares, give or take. We're looking at the same ballpark as last year. The second topic you raised, the fact that some of these commercial property projects have been pushed back, been postponed. Well, we're looking at sizable amounts. So of course, it makes a big difference in terms of sales and in profits. And of course, Bouygues Immobilier's profit numbers depend on those projects. They've been delayed or postponed for a number of reasons, the marketing for administrative authorizations and such like. So it's true that some of these projects will only be signed in Q4. So of course, that impacts our profitability because there's some sales didn't happen in H1 to Bouygues Immobilier. And in commercial property, traditionally, projects are more profitable than residential projects. And so both in terms of sales and in profits, we have an effect because, of course, profits are higher for commercial properties. There you have your answer. Thank you so very much. Nicolas Collison from HSBC. I have a question on telecoms. Just on the price environment that was referred to earlier on. You talked about last year's market, but Bouygues Telecom put a very aggressive prices, particularly in fixed lines during the summer. And the trade off between volume and price, when do you feel that you'll be able to reduce the price impact and increase your ARPU. What about your critical mass in fixed lines, which I believe was 4,000,000 customers? Charles Liel will answer that. Concerning the promotional side of telecommunications, in mobile phones, in 2018, drives were around the €5 mark last year, €10 this year. In fixed lines, promotions have been at a constant level. In the first twelve months, the prices are slashed and then the value is reinstated, all the more so that newer technologies generate higher billings and of course, options sell better after the first twelve months. So we're very confident about this price development and this slowing down of promotional drives. As Olivier said earlier on, this will have a direct impact this has had a direct impact on the rate of churn. Your second question concerned the critical mass. Okay. I don't know if you saw the curve, but it would appear that the curve is not flat. It's rising constantly and significantly because almost every half year, we're adding its 300,000 new customers or thereabouts issue. So we continue to grow. Our first level of ambition was €4,000,000 We're very close to that. Let's say the momentum suits us. We're happy with the momentum as it stands. But this growth continues to be good, strong. There's no reason why we should stop at we've actually, we will have achieved the 4,000,000 mark in the next couple of months, and we'll be setting ourselves new targets while we're on the on on the way towards, well, to the future. Any more questions? Yes. Gentleman at the back. Thomas Coudry from, Berra Gardein. I have two additional questions on telecommunications. I I take the guidance issue the other way around. You are quite comfortable about the €300,000,000 mark, but you've told us that the market is facing encouraging. Now if, on the contrary, you were to exceed 300,000,000, what would your strategy be? Would you allocate that to earnings or earmark that amount or that surplus amount for CapEx? Second question, could you give us more information on the corporate segment, which is an important part of your telecommunications strategy? Could you tell us about the Corporate segment's contribution to Bouygues Telecom's results from a more operational point of view? How are you going about acquiring market share, the market share that you need to grow in this segment? Concerning surplus free cash flow over and beyond €300,000,000 we'll see. We'll see. For the second part of your question, we'll have to think about it before we give you a more specific answer. Now, we don't give you the breakdown of sales in B2B, but let me reassure you on two counts. First of all, mobile sales continue to grow and in fixed lines, our market share, historical market share. This is a very buoyant market for us, although more so, that we have made two acquisitions for small businesses, NEM and CAIO, who are both contributing now that we've integrated them, both helping us address this very dynamic segment. So our target is to be the real third player in the B2B segment. No other questions? Gentleman here. General Eric from Barrant Garnier again. Concerning the operating margin, could you confirm Bouygues Immobilies, Are we still could you just confirm that the margin is expected to drop 100 basis points? What about Bouygues Construction and Colas, their operating margin for the full year? Yes, we can confirm everything you've just said. This is what we said at the start of the year. So improved margins in Bouygues Construction and Colas and indeed, at Bouygues Immobilier, the additional costs that we have to handle have led us to revise our margin downwards by 100 bps, provided that the commercial market continues to evolve as we anticipated between now and the end of the year. I have three questions. Just a word about Millen Mac Asphalt. This is a big acquisition. Could you tell us what you found since you took ownership? Secondly, there's been a lot of external growth, but is there any more in the offing? Are there any other potential acquisitions you're looking at? Or how do you foresee external growth in the second half year? And the never ending question of consolidation in the telco market, Could you confirm that all is calm in the telco market? Let me begin with your third question, consolidation in the telecommunications market. I was very clear about this. I don't believe in it. I don't believe in consolidation for several reasons. Firstly, it's difficult or would be difficult to explain to the market that four profitable operators would be better off if there were three even more profitable operators. So very difficult to make that point to the market. In the past, I explained that it cost more to depreciate four networks as opposed to three. Apparently, this was a rationale that was too complex and wasn't well taken on board. Now we have the four networks. We're going to have to deliver them. Let me add that when I see what happened in Italy, where they reduced the number of networks and operators from four to three and now they're considering increasing from three to four, well, I'm not sure that that's very convincing, certainly not in terms of reducing the number from four to three. I think that that is something that has become impossible. It's a political it was a political decision. We have to live with that. It generated billions in losses. Tens of thousands of jobs were lost. Considerable investments had to be made. Okay, that's all been done and dusted. We have to live with it. This brings me to external growth. Well, as you saw, we made a number of very good acquisitions in 2018. That was the case of Colas, that was the case of D'Efins, Bouygues Construction, also at Bouygues Telecom. So a lot of good acquisitions. I think we must now take the time needed to integrate all these acquisitions. It takes a few weeks or even months to negotiate a transaction, but then you check it out. But there's also a different phase when you have to share cultural values and goals, objectives, and that takes time. This is what we call integration, and that's what's happening. Let me add that in terms of our thoughts on external growth in all our businesses, there are plenty of opportunities. Thank goodness. There's no shortage of consultant bankers doing their job of coming to offer us this or that transaction, no shortage of employees heading as well. In your strategic plan, this or that form of growth would be a good thing. But as always, it has to be or there has to be a trade off between integrating new acquisitions or even sometimes new businesses and of course, our financial ability to fund all this. This has to be done in a way that suits us. By that, I mean, let's be clear, that it suits Bouygues' shareholders. I'm sure you'll have noticed that we have been extremely respectful of our shareholders for a very, very long time. Concerning Miller McAsphalt, maybe I could ask Frederic to tell you how we're getting on. Of course, as you know, the McAsphalt acquisition is two, McAsphalt and Miller. Concerning McAsphalt, I think we found exactly what we thought we were buying. In other words, the leader in the bitumen distribution market in Canada. Everything is going to plan. We are now working on synergies between MacAsphalt and the other entities of our group in the same line of business. Macassafrald is now selling bitumen to our entities in The U. S, which is something we intend to expand. Concerning Miller, Miller is in the more traditional business. There's a good geographic complementarity with Canada, with our historical entities. So it's a big group that we're integrating. This takes a certain amount of time. But so far, what we found corresponds well with what we expected to find. Again, we're working on integration and synergies, and we're very glad that we've made these acquisitions. Concerning bitumen, I'd I'd like to add a word. Colas is now the biggest purchaser of bitumen in the world. It may be perceived as a weakness, but it's also a strength. When you're the biggest buyer of bitumen in the world, that improves your negotiating clout and constitutes, to my mind, I'm convinced of this, a strategic advantage. We'll have to work on this. Operates in Asia, in Europe and North America. And Colas uses, transforms and purchases bitumen on a very large scale. We have transportation means, trucks, wagons, storage and transportation possibilities. That's a very big heavy industry business, and we're very confident about it. Do I see another hand raised? No? In that case, ladies and gentlemen, thank you.