Earnings Call: Q1 2019

May 16, 2019

Ladies and gentlemen, welcome to the Bouygues First Quarter twenty nineteen Conference Call. I'll now hand over to Karine Adam, Head of Bouygues Investor Relations. Karine Adam, please go ahead. Good morning, ladies and gentlemen. I would like to remind everyone that you can find on the company website at www.brit.com the earnings press release, the presentation we will be commenting on during this conference call, an Excel file with historical key figures for the group and 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. Before starting our presentation, I would like to share with you on Slide three the impact of the application of IFRS 16 on the group results as it is effective since the 01/01/2019. We already provided full year restated 2018 results at the group level with the year end announcement. In Q1 twenty eighteen, the impacts are: first, an increase in net profit attributable to the group of €2,000,000 from €12,000,000 to €14,000,000 and second, a positive impact of €17,000,000 on the current operating loss, which is reduced from €111,000,000 to €94,000,000 mainly at Bouygues Telecom. A restatement of the 2018 quarterly results that are fully comparable with 2019 is available in the notes to the consolidated financial statements. The new IFRS 16 presentation in the financial statements splits the lease payments between amortization expense and interest expense. Therefore, the application of this new standard leads to a discrepancy between the lease expense accounting treatment and its effective disbursement. To continue to treat lease charges as operational expenses, we have adopted new KPIs. First, EBITDA will be replaced by EBITDA after leases, including lease expenses. Second, we will comment on two new indicators in this presentation: current operating profit after leases and operating profit after leases, including both lease expenses. And third, we have changed the definition of net debt and free cash flow. We now exclude lease obligations from net debt and repayment of lease obligation from free cash flow and free cash flow after working cap. These new indicators more closely align with how we manage our businesses. All definitions are detailed in the glossary of the presentation on Slide 15 as well as in the press release published this morning. I would now like to turn the call over to Mr. Philippe Marien, Deputy CEO of Bouygues. Thank you, Caroline. Good morning to all of you, and thank you for joining us. I would like to welcome everyone to our conference call to discuss Bouygues' first quarter results. With us in the room is Christian Le Coch, CFO of Bouygues Telecom. Following my comments, we will be answering your questions. To begin on Slide five, I remind you that like every year, first quarter earnings are not indicative of the group's full year results. Turning our attention to the key highlights of the quarter. First, all three sectors experienced strong commercial momentum, confirming their good positioning in their respective markets. Second, the group current operating profit improved significantly year on year, boosted by strong results at both Bouygues Telecom and TF1. In this context, we can confirm the full year outlook shared with you in February. Turning to group key figures on Slide six. Sales were up 16% year on year at €7,900,000,000 This strong increase reflects the positive impact of the acquisitions, including notably Miller McAfee, Alpiq Engineering Services and Ofemina that were not consolidated in Q1 twenty eighteen, like for like and at constant exchange rates, sales increased by 8%. Current operating profit and current operating profit after leases improved sharply in Q1 twenty nineteen compared to one year ago. Q1 twenty nineteen current operating profit after leases was a loss of €73,000,000 compared to a loss of €108,000,000 in Q1 twenty eighteen. The sharp improvement in first quarter twenty nineteen was driven by the strong results of both TF1 and Bouygues Telecom despite an unfavorable comparison impact at Colas. Colas indeed recorded losses of €37,000,000 in Q1 twenty nineteen from Miller McAfeeld due to the usual business seasonality in Canada, whereas no contribution was consolidated in Q1 twenty eighteen. Operating profit after leases decreased slightly year on year by €5,000,000 mainly due to a decline in non current income from €61,000,000 in last year's first quarter to €15,000,000 this year. As anticipated, the decline is mostly due to lower capital gains at Bouygues Telecom with 58 sites transferred to Cellnex in Q1 twenty nineteen compared to three thirty one one year ago. Finally, net profit was down by 73,000,000 from a year ago notably impacted by Alstom's contribution of €33,000,000 in Q1 twenty nineteen, a €40,000,000 decrease from last year's first quarter contribution. Let us take a closer look at group current operating profit after leases on Slide 7. You can see that the €35,000,000 year on year improvement came from first Bouygues Telecom delivering solid revenue and EBITDA growth. Therefore, Q1 current operating profit after leases rose from €53,000,000 to €84,000,000 year on year. And second, TF1 posting a 24,000,000 increase profitability in the first quarter twenty nineteen posting compared to one year ago. Moving to the construction activities. Q1 twenty nineteen current operating profit after leases included Miller McAfee's seasonal losses of €37,000,000 whereas no contribution was consolidated in Q1 twenty eighteen. Excluding Miller McAfee's losses, the Construction businesses' current operating profit was up €14,000,000 year on year. Let us now turn to Slide eight to review the financial structure of the group. You can see that the group maintains a strong financial position. Net debt was €5,100,000,000 at end March twenty nineteen compared to €3,600,000,000 at end December twenty eighteen. The increase mainly reflects the usual seasonal impacts from Colas. Net debt increased €1,300,000,000 from end March twenty eighteen, mainly due to the acquisitions of Alphic Engineering Services by Bouygues Construction and Colas, Ofemina by TF1 and Keio and Nerim by Bouygues Telecom. I remind you that we expect net debt of approximately €3,700,000,000 at end twenty nineteen at the group level, stable compared to 2018. Please keep in mind that this amount does not include the payment of a €5.5 per share dividend that will be proposed by Alstom at its shareholders meeting in July. Owning close to 62,100,000.0 Alstom shares, which should receive 3 and 41,500,000.0 in Q3 twenty nineteen. As previously mentioned, net debt was €5,100,000,000 at end March twenty nineteen, up €1,500,000,000 compared to end December twenty eighteen. The increase over year end is mainly explained by the traditional seasonality at Colas and an outflow of 157,000,000 in acquisition and disposal coming mainly from, first, the acquisition of 100% of Nerim shares and the success of the takeover bid of 85% of KEU in March 2019 at Bouygues Telecom and second, the acquisition by TF1 of Dimension, a leading Belgium auto video producer. You can also see that change in operations is stable in the 2019 compared to the 2018. Turning to the breakdown of operations on Slide 10. You can observe that we have highlighted a new box on the graph called repayment of lease obligations. This new presentation will help you calculate the net cash flow after leases. This indicator is more relevant than the net cash flow as it it aligns lease expense accounting treatment with its effective disbursement. At €124,000,000 net cash flow after leases year on year was stable. Net CapEx was up €68,000,000 compared to Q1 twenty eighteen mainly due to Bouygues Telecom. While gross CapEx year on year was steady, proceeds related to the sale of sites to Cellnex were lower than in the same period last year, as already explained. And last, change in working capital requirement was stable, in line with our full year expectations. I will now turn the review of operations, starting with the Construction businesses. Let's begin with the backlog on Slide 13. In the first quarter, we maintained good momentum with the backlog at a record level of €34,400,000,000 at end March twenty nineteen, up 9% year on year and up 4% at constant exchange rate and restated for major changes in the scope of consolidation. Overall, the share of order book in International Markets remained unchanged at 61% from end December twenty eighteen, but higher than 57% recorded at in end March twenty eighteen. The backlog remained stable in France, as you can see on Slide 14. It reached €14,600,000,000 at end March twenty nineteen compared to €14,400,000,000 the previous year after restatement in 2018 of Axione's backlog following the deconsolidation of the business. The backlog at Bouygues Construction was €8,500,000,000 up 2% excluding Axione. At Colas, the backlog reached €3,800,000,000 at end March twenty nineteen, increasing 7% over the previous year, which reflects growth in Rail and Road in France in a pre election year. Looking at Bouygues Immobilier. The backlog was €2,300,000,000 at the end of the first quarter, a decline of nine percent compared to last year, reflecting, anticipated, the decrease of the French residential market as well as the rescheduling of some commercial projects that should be signed in Q4 twenty nineteen. Turning to Slide 15. You can see that in International Markets, the Construction businesses remained strong. The International backlog was up 19% year on year and up 6% at constant exchange rates and after restatement for major changes in the scope of consolidation. Some significant contracts booked in Q1 twenty nineteen include the the University of Brighton's Moulthcombe Campus for €181,000,000 and a rail maintenance contract in The U. K. For €60,000,000 Now let us turn to the key figures businesses on Slide 16. Sales were up 17% year on year and up 8% like for like and at constant exchange rates. As usual, first quarter earnings are not indicative of full year's results. Current operating profit after leases was a loss of €213,000,000 in first quarter twenty nineteen, a decrease of €22,000,000 compared to the first quarter of last year. Colas' current operating profit after leases benefited from growth in Road in France and improvement in specialized activities, thanks to recovery measures, especially in Rail in France. This good performance was able to offset the negative contribution from Milan MacArchefal's operation, which recorded a loss of €37,000,000 this year, while they were not consolidated in the first quarter of last year. Bouygues Immobilier's performance was negatively impacted by low activity in commercial property development as projects should be finalized in Q4 twenty nineteen, as mentioned previously. Furthermore, a buoyant French market related to 2017 peak reservations has strained resources resulting in pressure on margins. Now let us move to TF1 on Slide 18. I will briefly review TF1 since they have already released earnings on the twenty ninth April twenty nineteen. Sales were strong in Q1 twenty nineteen, up 11% to €554,000,000 More specifically, we can mention, first, the acquisitions in 2018 had a positive impact notably in digital with Ofemina second, that TF1 had good performance in linear and nonlinear broadcast ratings and third, you can say that premium agreements signed with operators contributed incremental revenue. On the chart, you can see that current operating profit rose by 24,000,000 and current operating margin increased 3.6 points to 11.4% as TF1 maintained tight control over cost of programs. For the year, TF1 confirmed its target to double digit current operating margin. Now let me turn the call over to Christian. Thank you, Philippe. Bouygues Telecom published a very good first quarter set of results. Let's start with the commercial performance on Slide 20. You can observe that Bouygues Telecom commercial momentum remained very good in both mobile and fixed during the quarter. In mobile, the market was as agitated than one year ago, as shown in the recent release of ARCEP postpaid figures. Although there were some promotions in the first quarter twenty nineteen, the price of the plant was higher at €10 per month compared to €5 last year. Therefore, the level of postpaid growth adds and churn was significantly lower than in Q1 twenty eighteen. In this context, we won 459,000 new mobile customers in the 2019, of which 149,000 were new planned customers excluding M2M. At end March twenty nineteen, Bouygues Telecom had 11,000,000 customers excluding M2M, a 26% increase compared to four years ago. This success is the result of our strategy in mobile to differentiate through the quality of our four gs network and through our customer experience. As a matter of fact, we are beginning to see the first positive sign of the core sensitive program launched in 2018 for a more seamless user experience. In fixed FTTH net adds have accelerated again this quarter. Bouygues Telecom won 94,000 new FTTH customers in the 2019. With 663,000 FTTH customers at end March twenty nineteen, our FTTH customer base has doubled compared to one year ago and represents 18% of our fixed customer base. We expect this positive trend to continue, supported by an increase in market premises and the success of our offers. Indeed, at end March twenty nineteen, Bouygues Telecom had a total of 8,000,000 metric premises. The number of premises marketed will continue to accelerate in 2019 to meet our goal to market 12,000,000 premises by end twenty nineteen and twenty million premises by 2022. Overall, the total customer base reached 3,700,000 broadband users at end March twenty nineteen. Slide '21 highlights the strong results of Bouygues Telecom in the 2019. Revenue growth was solid with total sales up 13% and sales from services up 6% year on year. Sales benefited from the continued growth of our customer base and the ability of Bouygues Telecom to stabilize mobile eBPU at €19.2 per month for two years in a row. EBITDA after leases rose significantly by €50,000,000 in the 2019 compared to the same period last year. The margin of EBITDA after leases and sales of services was up 3.2 points to 27.4%. However, operating profit decreased by €14,000,000 compared to the same period last year due to lower non current income, which is mainly related to the transfer of fewer sites to CEMEX in Q1 twenty nineteen compared to last year, as previously explained by Philippe. Gross CapEx is stable at €327,000,000 and we confirm our expectation of less than €1,000,000,000 gross CapEx in 2019. I would like now to focus on our B2B segment as Bouygues Telecom has finalized the acquisitions of Keio and Nourim in the 2019. The key characteristics of the acquisitions are detailed on Slide 22, including summary financial data, their size and market focus. Keyyo provides Bouygues Telecom with simple, reliable and competitive solutions for SME and SOHO, while NEMB brings expertise in core network, voice, IP and hosting services. Those two acquisitions allow Bouygues Telecom to accelerate its development in the SME market in both mobile and fixed. Kayo has been fully consolidated by Bouygues Telecom since 01/01/2019 following the acquisition of 43.6% of its shares. The takeover bid that followed exceeded the 85% holding threshold. As a result, a public tender offer followed by a squeeze out for all outstanding shares is now taking place. Naim was acquired on 03/13/2019 and will be fully consolidated in the group's accounts as of the second quarter. The total price paid for this acquisition is around €120,000,000 The first goal of this acquisition is to increase Bouygues Telecom's market share in the SME and fixed markets. And the second goal is to expand our addressable connectivity market in growing new segments. As of today, Bouygues Telecom is the third operator in the €7,500,000,000 B2B connectivity market as shown on Slide 23. The global French B2B market represents an overall value of €30,000,000,000 and includes: first, hardware supply, for example, with Cisco second, connectivity, which is a core market of Bouygues Telecom and where we are the third operator third, managed services, which is closely related to telecom fourth, network security fifth, cloud, for example, with EAS or OVH and sixth, IT applications with Microsoft. Without seeking to directly compete with the big leaders in the sector, Bouygues Telecom is focused on expanding its footprint beyond connectivity to otherwise managed services, network security and cloud services. This represents an additional addressable market market of €12,000,000,000 Slide 24 presents Bouygues Telecom market share in the connectivity market. You can see on the two graphs how the €7,500,000,000 market is split between small and middle enterprises and large companies and between fixed and mobile. Bouygues Telecom has built a strong position in the large companies' mobile market based on the quality of its four gs network with around 30% market share. In the fifth, it has remained a small player so far. In the SME market, Bouygues Telecom's market share is quite low in both mobile and fixed, providing opportunity for growth. KEO and Nearing will help us achieve this target. I will now explain our strategy to address the connectivity market and to expand into services related to connectivity. Going to Slide 25. The goal of Bouygues Telecom Enterprises is to provide customers with global offers, including connectivity related services. We planned the acquisitions of Keio and Nerim to address the SME segment. And in the large companies segment, we will partner with well known companies. In the connectivity core market, Bouygues Telecom will continue to develop a high speed offering, thanks to its best in class network. More specifically for large companies, we will rely on our partnership with Telefonica. To summarize, Bouygues Telecom Enterprises has three strategic priorities for the coming years: first, to be a leading connectivity operator with unwedged service offerings directly or through partnerships second, to expand in the small and middle enterprises market and third, to reinforce our positioning in large companies. Thanks to this strategy, we expect Bouygues Telecom Enterprises to contribute to the growth of Bouygues Telecom in the coming years. Thank you, Christian. I would like to briefly comment on the financial statements. We have already looked at sales on Slide six. The line other operating income and expenses on Slide 27 shows a decrease of €40,000,000 year on year. This includes the transfer of fewer sites to Cellnex at Bouygues Telecom with 58 sites transferred in Q1 twenty nineteen compared to three thirty one in Q1 twenty eighteen. Cost of debt is stable year on year. Turning to Slide 28. Income tax was €25,000,000 compared to €54,000,000 one year ago. As usual, changes in income tax expenses in the first quarter is never relevant because of the very low level of tax base. The negative change in associate and joint ventures line is explained by Alstom's net contribution. As announced, Alstom contribution was €33,000,000 in the 2019 versus €73,000,000 in the same period of last year. As you can read on Slide 30 and as stated at the beginning of this call, we confirm the outlook shared with you in February. This concludes my presentation. Operator, please open the floor for questions. We already have a question from Nicolas Colisson, HSBC. Nicolas Colisson, I give you the floor. Please go ahead. Thank you. Hi. I've got two questions. One to start with construction. Can you tell us a bit more on the next steps regarding the Grand Paris? And what is the timing on the big next steps and when you can win new projects? And in telecoms, just going back to your strong fiber net adds, I wonder if you could tell us what is the mix between co investment and rental in your net adds, but also in the total base? What is also the dynamic between very dense and less dense area? And very last, just to come back on CityFast, your fiber infrastructure operation. Can you financial flows between Cityfast and Bouygues Telecom? Thank you. Good morning, Cola. First, about the mix between co investment and retail, we don't disclose this information, and this information information is moving quarter after quarter. So we do not give any figures on this part. Your third point was about Cityfast. So as you know, we are building the infrastructure, and the infrastructure is paid by CityFast. So we get some revenue coming from CityFast. But of course, we have also some OpEx, and the margin is quite small, so very small impact on EBITDA. And I don't remember what is your second point. It was It was the dynamic between very dense and less dense area. Well, we are selling FTTH offers on all territories. The dynamic is very good on both. There is no big difference between the variance area and the Middleton area. Okay. So regarding the Grand Paris in terms of new attribution, new tenders. So mainly the main decision will be on Line 15 East and West, two packages. And the result will be probably more 2020 than before the end of this year. So that's for the two large next packages. On Line 18, you have some smaller lots. The Lot two will be is expected in this year for the Lot two, so Palaiso Biancourt portion. For the two others, so the one and the three, all these tenders were in are in process, but we have not the final result. And both of them are for the time being in an old position. Clearly, we don't anticipate big news before end of this year, but more probably beginning 2020. Okay. Thank you. We have another question from Jaap Pujal, Kepler Cheuvreux. Jaap Pujal, I give you the floor. Please go ahead. JOSE I HUMBERTO have three questions, please. The first one is on Colas. In Q1 twenty eighteen, you had some difficulties in rail and other areas. Do you have a view on how much those losses have been cut. So in the €37,000,000 improvement in Colas EBIT, if we exclude the Miller McAsphalt deterioration, so this is how you present it, how much is the recovery of these sources of losses? I have other questions, but you want them all now? As want, Josep. Good morning. So regarding the difficulty of Colas Fye, clearly, have taken a series of measures to deal with all these difficulties. Clearly, the positive impact in the Q1 twenty nineteen is very small, in fact, because the most important difficulties came during Q2, Q3 and Q4 in 2018. So the improvement is mainly due to a very good situation in the roads activity in France. Okay. Still on Colas, is the margin improvement the key focus? Or is it a combination of top line growth and profitability? Because when I see the order book, which is very strong, plus 18%, part of that is external growth. But even if we look at like for like, it's plus 11%. One could say that, okay, this is not, I would say, as selective as it could be, yes? Maybe if you grew your order book by less, you could make sure that the margins embedded are even higher. So is this the right way to think about that or that margin is not only the key focus? Or how to how should I see that? Yes. Well, you know that in the business with a fixed cost basis, it's a little bit different than a business with a pure variable cost. So clearly, in Colas, it's very important to have a certain level of activity because you have a lot of fixed cost, the asphalt plant, the carrier equipment and so on. So clearly, we said always that for building and civil works, it's very important to be focused only on the quality of the new orders. For Colas, the situation is a little bit different because you need to have a sufficient level of activity to reach at least breakeven. And when you reach breakeven, after that, you are in a very good situation to increase your margin. So the way to increase the margin in the Colas business is obviously to manage your costs, but also to have a very good level of activity. It was the reason why in 2018, it was more difficult to have a good level of margin because of the lower level of activity. It's the contrary this year, probably for the full year, thanks to a good level of activity. So we can't say that we focus more on volume than on margin. In Colas, you need to have a certain level of activity to increase your margin because it's a fixed cost business. Okay. Understood. And one on real estate, please. The margin was cut to half in Q1. Yes. I think that the guidance that you give for the full year is a margin drop of around 1%. One one point. Okay. Instead of 3%. So this remains valid, it's not Absolutely. There is no change in our guidance. The fact is that in Q1 twenty eighteen, we had some significant commercial operation with a very high level of gross margin, which is not the case in Q1 twenty nineteen first. And this element will not be for the full year, obviously, because we hope to get some good contracts before the end of twenty nineteen in commercial in the commercial activity. And the second element is for the full year, for the first quarter but also for the full year, a pressure on the cost of work because of the buoyant situation. And this effect will continue during all the year and it will be the explanation at the end of this year to a decrease, but no more than 1% on the margin in real estate activity. Okay. Thank you very much. Ladies and gentlemen, We have another question from Eric Lemarie from Bryan Garnier. Please go ahead. Yes. Good morning. I have a couple of questions. And first, on Bouygues Energy and Service, could you maybe give us some rough indication of the profitability of Bouygues Energy in Q1? What about the contribution of Alpiq maybe? And are you happy with the integration of Alpiq Engineering so far? This is my first question. And I've got a second question on Colas. You mentioned 2020 is a year of action in France. Are you a bit afraid of a slowdown of the roadworks market in France next year? Okay. We are not afraid because it's the usual cycle in term of road activity. You have the two years before election, then less incentive activity during the election year. And you come back to a good situation, the year plus two or plus three after the election. So we are not afraid. It's the normal cycle and we manage that for years now. So and we will see exactly the same trend in the coming year regarding the road activity on the municipal part of the business. Don't forget that on top of that, we will have and started in 2020 and after the positive effect of the Grand Paris development, which will be good for Colas either for rail but also for road in the future. So clearly, we will consider that we will have obviously a decrease in the road activity regarding the municipalities activity, but an increase in terms of roads around the Grand Paris development. Okay. And do you think the increase from the Grand Paris will offset the decrease from Well, we will see. It's always very difficult to have a long term view in Colas because the backlog is very short. So we will discuss 2020, 2020. Okay. Thank you. Regarding Energy and Services, obviously, we are we consider that we are on the right way to recover a good situation for this activity within Bouygues Construction. Clearly, in the first quarter, we moved from a negative situation with a negative margin in Q1 twenty eighteen to a positive 1% the first quarter twenty nineteen. And the profitability was very low, obviously, 1.1%, but positive compared to a negative figure one year ago. And you said 1.1%, right? Yes. Yes. Okay. I said that, which is the right figure. Regarding integration, nothing specific to say, nothing more than at the beginning of the year. The process is ongoing with no particular surprise for this integration. We have another question from Mathieu Robillard from Barclays. Mathieu Robillard, give you the floor. Please go ahead. Yes, good morning and thank you. I had a question on construction first about the order intake in France, which if I read correctly was down 29%. I wondered if you could give us a little bit of color in that number and how you expect it to develop throughout the year? Second, I had a question on telecoms. If I look at the slide where you show B2B exposure, I mean, rough, I get to maybe revenues of around €400,000,000 Is that correct? And can you also give us what kind of growth rate you're experiencing in that segment for the moment? And lastly, if I may, very quickly, could you share what was the loss in Canada of McAsphalt in Q1 twenty eighteen just so that I can we can see how the performance has developed in that business between Q1 twenty eighteen? I understand you didn't own the company and now. Okay. So first, Telecom. On Telecom, on the B2B side, sorry to always answer the same thing, but we do not disclose the B2B revenue, but I think we gave you some more detailed information as usual today First, and our main goal is to increase our market share in the fixed segment. Our goal is probably to double our market share in the fixed to increase our mobile market share for the so called business and SME and also to get some revenue from what we explained in the presentation from the service linked to the connectivity market. So regarding your construction question. For Miller McAsphalt, we had no figures for the first quarter twenty eighteen because the reporting of Miller McAsphalt before the acquisition was not on a quarterly basis. So we don't know what was the result for the 2018. But obviously, as usual, in this activity and it's the case for the Colas activity, it's clearly a loss during this period. But in our figures, nothing obviously because we have only consolidated Miller McAsphalt in the 2018. Regarding the evolution of the new orders for Building and Civil Work in France, you are right, the figure is decreasing. Two reasons for that. The first one, as I have mentioned, there is no and we win any big contracts regarding the Grand Paris program. The big loss will be more for 2020. That's the first explanation. And the second one is the fact that clearly, and we said that previously, based on the fact that we have reached a high level in term of backlog at the Bouygues Construction level, clearly, we are more and more selective in term of new orders. And so there is no reason to enter into a very harsh competition only to get contract. We don't need a very high level of new order because of the level of our current backlog, which is good in France and very good outside France. So clearly, we fly to selectivity and quality. And clearly, to be come back to the question of Josepiro, clearly, we want in building and civil works to be very selective and to prefer margins and volume. We have another question from Jacob Bluestone from Credit Suisse. Jacob Bluestone, please go ahead. The floor is yours. Hi, good morning. I've got a few questions as well. Firstly, on the telco side, can maybe you comment a little bit on what sort of margins you think you'll generate within the B2B segment? So is it do you think a higher or lower margin area compared to the sort of consumer side of your business? I guess if I look at the operating margins for the two acquired assets, they're actually pretty similar to what you do on your current business. So sort of any color you can give on whether you think this will be accretive or dilutive to your margins? That's the first question. Secondly, on can you maybe comment a little bit on the Alstom dividend? What do you intend to do with the proceeds? Do you see yourselves passing them on to shareholders? Is it just going to be for deleveraging? Are you sort of looking at any M and A? Just sort of any thoughts on how you might use those proceeds? And then finally, just on Colas. I mean, as mentioned earlier, you obviously have a very strong performance in French roads. I think your French roads revenues were up 17% this quarter as a result of sort of strong pre election market. I think typically, the local budgets are set around the beginning of the year. So you've probably got a little bit of additional color now on what the outlook is for this pre election boom. I mean should we think of that sort of plus 17% as representative for how big a surge we'll see this year? Or how should we think about the French Roads business for this year? Okay. So regarding your last question, unfortunately, we don't anticipate so huge increase for the full year. In fact, the good figures for the 2019 is linked to, first, good momentum in term of road activity in France, thanks to municipal election, but also because of a very, very good and smooth weather during the winter, which was not the case in 2018 by far. So the combination of good weather and good climate conditions and a good general trend, the result is a very, very good growth in the first quarter. But definitely, it's not representative of the full year. And it's big growth, but big growth on a relatively small basis. The first quarter is not one quarter of the full year net sales for Colas. But you're right, the trend remains good. And we'd anticipate not double digit, but a single digit growth in the road activity in France for 2019. All the budgets are in place, and there is we have no fear on the level of the growth in the road activity. Second question regarding the dividend of Alstom. So it's a very good news, obviously, to receive this more than €300,000,000 Nevertheless, it's not a massive amount, €300,000,000 it's a big, big amount of money, but not sufficient to think about return to shareholder, share buyback. And so we will use this proceed for the refinancing of our existing bonds and for development and some acquisition if we have some good opportunity, which is not the case for the time being on the table. So we will use this money on the regular on our regular activity and nothing specific regarding this good amount but not massive amount. So about your question about telecom and the B2B, the margin generated by the B2B segment. First, I would say that we do not have an EBITDA for the B2B activity compared to the B2B as we do not split our fixed assets, for example, network of SG and A between B2C or B2B and B2B. But excluding these fixed assets, I would say that the gross margin in the B2C and in the B2B are quite comparable, and we do not have big discrepancy between those two activities. About the effect of the two acquisitions, as you can maybe see in the slide, the EBITDA or the operating margin for Kios and Naim is around 10% because they do not have this any network assets. And so it will be a dilutive impact at the beginning for us, and it will take time to move them from assets from to our network or to our IT and so on. So at the beginning, we'll have dilutive impact due to that and also due to integration costs that will have during this year or maybe a part of next year. And after that, the effect will be, of course, positive. That's very helpful. Thank you. You. We have another question from Remy Aton from ODDO BHF. Please go ahead. Hi. I have one question on the construction side. In Q1, you have organic growth of 1.2%. Could you help us understand what contribution you have from Energy and Services versus building and civil works and how it is splitting between France and international markets? And the question on Bouygues Telecom is one of the actors on the French market is mentioning an EU directive from 2020, which could have a material impact on the subsidized markets. What's your view on this? So about the subsidy, judgment was taken on April in the case between of free between against SFR. We weighed carefully the judgment, and we think this does not imply the end of the subsidy. And this judgment concerns only SFR specific former offer. So today, we are not affected by this decision, and we continue to use subsidy to be able to offer to our clients handsets. So regarding your construction question. For Bouygues Construction, the 1.1% roughly growth, same perimeter same exchange rate, is the international is a decrease in the French activity. And regarding split between Energy and Services and Building and Solar, I have not the figures in mind. So Karine will answer later on, on your question. We have another question from Frederic Boulan from Bank of America. Firstly, on the construction side, to follow-up on previous comments on the acquisitions you've done on Alpiq and Miller. So it was interesting to see the contribution in Q1. If you could just remind us in terms of incremental revenue and EBIT you see for the two assets, Miller and Alpiq, I guess, in 2019 and in 2020, so on a normalized basis where you see those assets going once you're done with the integration costs that you're incurring initially? And then secondly, just to come back on the very strong service revenue performance in telecoms. You mentioned your build ARPU remained stable at more than €19 despite very constant promotions at around €10 for 40 gig or So so of could you explain a little bit what are the actions you're taking in terms of back book pricing to limit the dilution from the new customers? Thank you. So I want to on your question on telecoms. So about the step from service increase, the increase, as you said, reflects the positive volume effect both in mobile and fixed. And second, the stability of mobile ABPU. We have been able to stabilize our mobile ABPU for now two years. And I think we already explained that. We had many promotions during two years or more than that. But in the same time, we have been able to increase our prices on our installed base for our existing clients, mainly not only similarly globally market but on the premium offers where we are able to offer we are in, I would say, more and more strategy more for more strategy. So we are able to increase prices by offering more services or more things in the bundle to the clients. And we did that last year. And so that's why you have in the Q1 twenty nineteen, you have the full effect of the increase in pricing we made last year. Yes. Regarding construction, your construction question, Karim, regarding Colas, the so regarding sales of Colas in Q1 twenty nineteen, the contribution in sales for Minerva cash flow plus Alpiq catenaries is roughly €100,000,000 roughly. And for reconstruction, I will give you later the numbers today, okay? But maybe more Okay. Broadly Thank you. But maybe more broadly, now a couple of quarters after the acquisitions, if you can share versus the initial numbers you shared in terms of annual revenue and EBIT for For MiraLA cash price, it's the same. And we confirm what we have said at the period of the acquisition. So you understand? And for Alpiq, again, no change in term of revenue. And clearly, term of margin, we said that we will be able to increase the total margin of Energy and Services in the coming two, three years to reach the 3.5%. Okay. Thank you very much. The next question is from Jerry Talis from Jefferies. Jerry, please go ahead. Questions, please. First question is also in terms of telecom pricing. You were describing a few weeks ago, obviously, how the promotional environment the market was easing off a little bit. And I just wondered if you could clarify what's been happening very recently now that we're sort of halfway through Q2. Is that still the situation that you see? And are you confident that you can continue to sort of extend the More for More pricing approach on the main brand into further such list price increases over the next few quarters? Or have you essentially done the More for More price increase for 2019 and therefore, the next pricing action wouldn't be until we get into next year? And then my second question has to do with the five gs spectrum auction. It looks like the government has drafted a letter to RCEP setting out some of the basic parameters for the awards process. And it's reported that, that does include within it, as expected, some fairly robust conditions around geographical network coverage, including in some of the more rural areas. With that in mind, perhaps you could clarify for us how much visibility you feel Bouygues Telecom has on its CapEx budget beyond the year 2020? So your first question is about the level of competition in the market in Q2. So it is the same as in Q1, no change. You always have some tactics offer made by all competitors, but no big move. And everything is you don't have very low prices. Everything when you have some promotion, everything is around €10 per month, so no big impact. About our ability to continue to increase our tariff for our existing customers, while we will see what we'll be able to do this year. But this year, we will also have the positive impact of what we did last year. So we will see for the coming quarter. Your last question was about the frequencies of 3.5 frequencies. Well, we have exactly the same information as you. We are waiting for the RCEP guidelines. It should be communicated at the end of this month or maybe June. Then there will be a public consultation on coverage in June. So as we do not have the result of this coverage of this consultation coverage, it's difficult to know what will be the operator's obligations. And then the allocation process should be at the end of this year. About our CapEx for 2020, we do not give any guidance for CapEx for 2020. Our guidance is on the free cash flow, and it is to be at more than EUR300 million, excluding, of course, the cost of processing if we have to pay the 3.5 gigahertz in 2020. Could I ask you a quick follow-up, please? The 6% service revenue growth rate that Bouygues Telecom reported this quarter, would you view that as being a sort of sustainable level for the balance of 2019? Or was there anything particularly exceptional or one off in nature within the Q1 result, please? Okay. So the 6%, sir, the 6% is not at the same center in the quarter. So excluding KO, I think it's only 5.3%. And ION used that last Q1 last year, it was around 5%. So we are quite the same speed as last year. So it's not a it's a good result, but it's not a tremendous result, I would say. And we do not give any guidance for this year. But of course, we expect to be at more than zero. So a positive increase for sales from services. But I remind you that our goal is to be at €300,000,000 free cash flow. And the sales from services increase will help us to achieve that. We have another question from Anjul Lee from Goldman Sachs. It's Nikola Gifford from Goldman Sachs. I have one question on your telecom business. You mentioned the lower non current operating profit in 1Q mainly related to the capital gain on the transfer of such to Cellnex. I was wondering how tower sales to Cellnex and other players have impacted profitability, especially or more specifically at the EBITDA level? Is this an overall benefit or headwind? And going forward, could you perhaps quantify the overall impact on your EBITDA from tower sales at large? Thank you. So about the tower sales, the profit the capital gain is not recorded in the EBITDA. You have that in the non current income, so between current operating income and operating income. So you I think that the figures are very detailed in the slide. The Annex, you have the exact profit we get from we got from Cellnex. And on the EBITDA level, it's more a loss as when we have sold the tower to Cellnex, then we have to pay rental rent to Cellnex each month or each quarter recorded in the EBITDA. So negative impact in EBITDA, positive impact in the noncurrent income. Okay. That's clear. So positive impact for this quarter. Not in the EBITDA, positive impact. It is a positive sorry, compared to last year, it is a negative impact as we sold less towers than last year. But you have in absolute value, you have a positive impact in the non current income not recorded in the EBITDA. Yes, very clear. And that negative impact on EBITDA, is that something that will continue going forward then if you've got rental? Yes, of course. Thank you. We have another question from Stephane Beyazion from MainFirst. Please go ahead. Thank you. One question on Colas, if I can. The good weather was quite obvious in the first quarter in Europe. But I can see as well that North America pro form a was up by 10. So I'm just wondering, is that entirely also due to positive good weather conditions? Is this a boost from Miller? Or is there also a pickup in North American market that we've been expecting to do better for quite some time? And I've got a second question perhaps on telecom. We've been doing quite many acquisitions in cybersecurity, in cloud services. I was just wondering whether you think that with Telefonica Global Services, you think you're addressing the full scope of services and that Orange is not trying to increase again the gap in terms of service teams versus what you're doing and whether that could be a challenge or not in your plan? Thank you. So our partnership with Telefonica is mainly to address very big companies, worldwide companies. Bouygues Telecom is offering to these companies services in France when Telefonica is doing the same abroad. About our strategy in the B2B, we consider that our core business remains telecoms, and that's why we decided to invest in to acquire Kayo and Nerim and not to acquire more cloud services company and things like that. And also about I think you had a question about the fiber. We are rolling out our FTTH and FTTO own infrastructures to be able, first, to link our mobile antennas to our core network by fiber and second, to address with our own infrastructures companies with FTTO offers. So regarding Colas in North America, clearly, we are benefiting from good weather condition for sure, which is part of the explanation and also a relatively good structural situation. But don't forget that the figures of first quarter, especially for North America, is very, very small compared to the full year. Right. So it's a good news. But clearly, speak about very and especially for North America, very small figures. Okay. Okay. So you wouldn't extrapolate to North American market growth returning to positive, particularly this year. That's all. We have another question from Alexandre Andre Ronsier from Exane. I would just like to come back on the other revenue line for Bouygues Telecom. And if you can tell us a little bit about the change year over year and more specifically, the drop through to margin and what kind of mix we're seeing in profitability? Secondly, still on telecom, if you could share us a little bit more about the net adds and the performance of your four gs box and how has that evolved over the last few quarters? So your first question was about the sales from services. Well It's more sorry, it's more about the other line of revenue. So ex services, your revenue in Bouygues Telecom. So about other revenues, the difference between the total revenue and the sales volume. Exactly. We have two things. The first one is the revenues we have from CTFAST for the construction of the FTTH infrastructure in the very dense area. And second, we had in this quarter an increase in handset revenue due mainly to higher services and the catch up effect. I remind you that we had a low Q4 twenty eighteen due to weaker shop attendance. Okay. So if So On it's the other revenue line. If I just may follow-up on that point. As you mentioned, I think, at the beginning of the call that the margin impact you were seeing from CityFast was very small. And I'm guessing your handset revenue also on low margin, we should think about the progression of EBITDA fully reflecting your change in sales and services revenue. Yes. Exactly. Your second question was about net adds. On the four gs box? Sorry, four gs box. Well, we still have some good commercial performance for four gs box. No big change in dynamics with this offer and we are still very happy. The LGBT area is evolving in parallel with our advanced network. And now it includes around 10,000,000 homes. Our customers are very satisfied with this offer. So today, satisfied or very satisfied. So it's a good thing for us, a good offer. That's very clear. Thank you very much. We have another question from Thomas Couillard from Bryan Garnier. Sir, please go ahead. Yes. Hello. Good morning. Just one question on telecoms, please. I would like to have your view on the fixed market and where the fixed market might be going because you have been the price leader in the fixed market for several years now. Orange is pushing ahead with its 2P Sosh offer. And on the other hand of the market, Iliad has launched its Delta offer. So I would like to have your point of view if we can really see a market going into premium and if there is room for price increases there also on the backlog as you are doing on the mobile side? Or whether we should stick to a low price business as far as you are concerned? So about the fixed market, the main subject is the fixed market, is moving from DSL to FTTH. It's a big change from now maybe eighteen months. About the two offers, one for Orange, the 2P offer and the other from Iliad, we do not have a big impact from due for this offer. First, about Orange, just because it is a 2P offer, so without MTG. And about the Delta box from Iliad, we do not have any impact, mainly because of the price, I think, which is very high. The fixed market now doesn't have a big competition in this market. This is still the same kind of offers with a twelve month period of promotion, so one year promotion and then the regular price. The prices is mainly evolving to be more at up, I will say, evolving up, yes. But when we are moving customers from DSL to FTTH, we usually offer them a twelve month period of promotion. That's why at the same time, you have increase in prices and more promotions due to the migration of customers to DSL from DSL to FTTH. As a result, even if our ABPU is we have a decrease in ABPU in the fifth this Q1 compared to Q1 last year, if you look at the figure, have been able to stabilize this ABPU compared to Q4 twenty eighteen. We have another question from Giovanni Montalti from UBS. Sir, please go ahead. Hello, thank you. Two quick follow ups. Previously, in among the other revenues, you mentioned fiber and handsets, You didn't mention the build to suit towers you agreed with Cellnex. Any clarification on this point? Yes. That's right. We my comment was on the difference on this line compared to Q1 last year. Last year, we already had a B2C agreement with CEMEX. We still have it. So there's no big change on this subject on this line. Okay, clear. But can you give us a broad indication of what's the breakdown between these three elements in your other revenues? I'm sorry, I do not have the figures. Okay. And sorry, a very final follow-up. Another analyst asked previously about the mix of your fiber net adds in between wholesale and proprietary network. I understand you don't want to comment on this point. But maybe if I look at Slide 33, looking at your targets in terms of coverage in the different areas. So you took off 4,500,000.0 by the 2019 in dense areas, 6,500,000 dense and 1,000,000 in the teen area. Can you give us an indication of which share of this coverage would be proprietary? And what would be wholesale agreements? Thank you. So in the variance area, I think we presented that last quarter with a big detail on the City First agreement. So I would say that half of the Vedanta area will be proprietary of the infrastructures shared with SFR. On the other half, it will be rental fixed costs. So not a wholesale agreement, but a fixed rental cost. On the medium debt area, as you know, we are able to buy tranches by 5% or to end the infrastructure. So the percentage of customers we have on the CapEx side compared to the OpEx side, I would say, is evolving quarter after quarter. When we buy tranches, we are moving customers from rental agreement to the CapEx, I will say, CapEx side. So that's why it's very difficult to have a precise figure of that because it's evolving each month. On the Public Initiative Network, we are mainly on the rental agreement business. Okay. Thank you. It seems that we don't have any more questions. I give the floor back to the company. Okay. So thank you very much for joining us today. We will be announcing first half twenty nineteen sales and earnings on the August 29. Should you have any questions, please contact our Investor Relations team. Thank you very much, and have a good day. Bye. Ladies and gentlemen, this concludes Bouygues first quarter twenty nineteen results conference call. 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