Earnings Call: Q4 2018

Feb 21, 2019

Good morning, ladies and gentlemen. Thank you for being here. Without further ado, let us, give you a presentation of our 2018 results. It's always pleasant to present the results when they are good. So some key figures. Of course, the group's profitability improved in Q4, which made it possible for our current operating profit to come out ahead at year's end, rather we expect it to come down slightly or at least to be stable. Current operating profit even restated with the 49% for the capital gains on the 49% sale of Axione to Mirabar is still up. And this was a good year in all our business areas in terms of sales. And the Board of Directors will be proposing a dividend of €1.7 per share, stable compared with 2017. Let's look at the key figures for 2018. First of all, sales, 36,000,000,000, up 8% compared to 2017, mainly due to acquisitions conducted in 2018. If you correct for these acquisitions and on a constant exchange rate basis, we'd end up with a 3% improvement in revenue. Current operating profit stands at €1,511,000,000 compared with 1,406,000,000.000 in 2017, thanks to Bouygues Telecom's outstanding performance. This includes a €106,000,000 capital gains resulting from the sales of the 49% of our Axione stake. Current operating profit in 2017 included €28,000,000 in capital gains with the sale of 50% of Nextdoor. So if you correct for these two one off items, current operating profit for the group was up €27,000,000 over the year. Operating performance for all three business areas in Q4 made it possible to offset some of the challenges we met in three projects at Bouygues Energy and Service and indeed in specialty activities in Colas in France that we encountered in Q3. Operating profit includes €250,000,000 related to capital gains from the sales of mobile sites and FTTH infrastructure at Bouygues Telecom, plus €16,000,000 for the bonus, the one off bonus granted to our employees, 34,000 of them. This was included, recognized in the twenty eighteen accounts even though they were only paid out in 2019. Net profit attributable to the group stands at €1,311,000,000 up €229,000,000 for the year. As a whole, if you again correct for one off items, it was still up €139,000,000 And so the group's performance over 2018 was up thanks to the significant improvement in current operating profit in all three business areas in Q4. As you can see on this slide, current operating profit in Q4 was up EUR218 million year on year. If you correct that for the capital gains of the 49% of Axione, it's still up €112,000,000 or 24%. And that again, that improvement was recognized throughout the group. Regarding the financial position, it is sound. Net debt at end December twenty eighteen stood at 3,700,000,000 better than expected. This €1,700,000,000 increase over the year is all to do with acquisitions conducted over the year. We still have about €10,000,000,000 in cash available, so we have a very satisfactory cash position. By way of conclusion, let me just say that the Board of Directors will be proposing a dividend of EUR 1.7 per share for the year 2018. This policy consists in increasing dividend regularly and reasonably or at least maintain that dividend even in challenging times. We have looked at the yield of the Bouygues share in 2018. It stands at 5.4%. And so it is one of the most profitable cat current stocks. Total shareholder return stands at 2% over two years and 44% for five years, which is right in the average of the cat count. Now Olivier Rousseau will give you a review of the operational performance. Good morning, everyone. And so let's start with the Construction business and the backlog. At end December twenty eighteen, that stood at a record high, 33,100,000,000.0, up 5% over one year, in fact 7% on a constant exchange rate basis. That includes €1,800,000,000 in the order books of Miller McAsphalt, Alpek and A. W. Edwards, but even restated of these three actors is still up 3%. The share of Bouygues Construction and Colas' order books internationally stands at 61% compared to 57% a year ago. Regarding the order book in France, the backlog in France at end December twenty eighteen was stable at €14,400,000,000 Bouygues Construction was slightly down, not including Axione. On this slide, you have a picture of a contract we won in Q4, the development of the Ivory Confluence neighborhood worth €88,000,000 In the context where the residential market is slightly down and some of the property projects were passed on from 2018 to 2019, we end up with an order book for Bouygues Immobilier down 8% year on year. Regarding Colas' backlog, this was up 8% mostly because of the road activities but also new orders in the railway business. In Q4, Colas won a contract for the restoration of the Runway Run Room Number 3 at Orly, euros 52,000,000. Looking at the market abroad, the group is in a good position. We have an order book worth €18,800,000,000 at end December, up 13% over the year, percent on a constant exchange rate and not including MacAsphalt, Alpiq and AW Edwards. That includes significant orders for Q4 such as the broadening of a motorway in Istri in Croatia, 167,000,000. And Bouygues Construction, we have the construction that was Bouygues Construction, I beg your pardon. Then we built a tramway in Liege for Colasse with two sixty six million euros Looking at construction activities, in Q4 twenty eighteen, current operating profit for Construction was up €145,000,000 over the year. That includes €106,000,000 in capital gains due to the partial disposal of Axione. But if you correct for that, it was still up €39,000,000 Now that improvement for Bouygues Construction reflects good performance in Public Works but also positive contribution of Bouygues Energy and Services. And for Colas, we have improved profitability on the road business in France. Operating current operating profit in Bouygues Immobilier is down, but that's because there was one project one property project that should have taken place in Q4 twenty eighteen and, in fact, was postponed to Q1 twenty nineteen. Let's look at the key figures for 2018. Revenue for the Construction business stood at €28,000,000,000 up 8% year on year. That is due, of course, to new acquisitions. But on a constant scope and exchange rate basis, it was still up 3%. Current operating profit stood at EUR $915,000,000, so that's down EUR 28,000,000. Now if you correct for the next door effect in 2017 and the Axione effect in 2018, we would be down €106,000,000 and that's because we encountered difficulties on three major sites in October in Energy and Service, but also some challenges we encountered in specialty businesses in Colas and Colas High. That was in Q3 twenty eighteen. So current operating profit, as expected, is down 60 basis points. But that doesn't challenge our views about our long and medium term outlook as we explained on our Capital Markets Day. And on this slide, we'll tell you just why we are confident in the outlook for the Construction business in the long and medium term. There are three positive trends underlying that belief. Number one, there are four major trends, significant urbanization, climate change with many consequences, environmental consequences, but also digital transformation, new uses of the technology. In many mature markets, we have significant stimulus plans that have been introduced to bring about or to build new infrastructure. Some of these plans were postponed somewhat, but they're still we're still looking at significant amounts even if they have been revised downwards. Then there's a real need for new infrastructure or to maintain existing infrastructure. Some of the incidents that we found in the winter showed that it is very much necessary to revisit some of the infrastructure. So we're looking at a longer, more complex, more sophisticated projects. You have sophisticated tunnels and bridges, high buildings. So you need to propose or offer integrated offers for big buildings, smart cities or eco neighborhoods. And then you have a high need for maintenance for infrastructure and buildings. So that means that requires more expertise, which means there are higher entry barriers. And because these are long term projects, there's less cyclicality. So that means there's less competition, and that gives us also more visibility. And this also means that over the long term, profit margins should be sustainable. Now in this context, our own position as a developer, as a builder and indeed as an operator provides us with significant competitive advantages. We're in a position to complete sophisticated projects and we are leaders in tunnel building worldwide. We have specific know how in sustainable construction. We have positive energy buildings. We have eco neighborhoods. We are the ones who invented what way the solar roads, smart grades, building renovation and the reuse of materials as part of the circular economy. We can do all that. We can also offer integrated comprehensive solutions to our customers at every step of the value chain. We have a significant know how to run a huge ecosystem. And we've seen with Colas when we worked together with many start ups as part of the project that we won in end twenty eighteen. So that position means that we can keep a direct relationship with the customer, which is a significant item at a time when the construction industry is facing significant disintermediation. Now our own position means that we are rather protected from that. In this positive context, this is a time for refocusing and adapting. We propose to develop our more value creating activities, smart cities, eco neighborhoods and smart roads. In 2019, there were three significant acquisitions: Miller McAsphalt for Colas Alpek for Bouygues Construction and the cables for Colas and then AW Edwards for Bouygues Construction. But in that year, there were a number of managerial changes. We have a new team running Bouygues Immobilier with Pascal Minot, and we have a new Managing Director for Bouygues Energie Services. He arrived earlier this year. He is she's got a significant experience in that field, and she will be running that business in France. And 2019 will be a year, as I said, of refocusing, adapting our business to improve profitability in the construction business. So Colas is repositioning Colas Rai in France, diversifying the customer base. And also in the Grand Paris contract, we're not just facing SNCF but other competitors. And we are refocusing our activities. We have sold part of our freight activities and we've also sold out some non strategic items such as SMAC. But of course, we want to be in a position to develop our business where we have a capital agreement with Mirovaire that enables us to be present in France on that market. TF1, we've had the results presented last couple of weeks ago. Revenue was up stood at I beg your pardon, stood at €2,300,000,000 up 7%, thanks to the good performance of our advertising revenue in all five free to air channels. We have, of course, premium agreements with all operators, telco operators and CANAL plus Also, TF1 was reinforced in its production and digital businesses. Current operating profit was up EUR 11,000,000 over one year, which is quite remarkable in a year where you have a major sporting event such as the World Cup, the Football Cup. And that means that TF1 was able to keep its programming costs under control. Operating profit the current operating profit was stable at 8.6%. But if you correct that for the World Cup, it would be as high as 11.7%. Group operating profit stood at €174,000,000 having recognized a €22,000,000 in nonrecurring expenses, which is depreciation of the audiovisual rights that were reassessed as part of the acquisition of Neuen Studios. And for 2019, the guidance for current operating profit is double digit again. TF1 has also confirmed its strategy on its core business in which it is well positioned because it is in a unique position in Europe because, of course, of a very broad audience but very rich content in all areas: news, drama, sports, movies. And it is also in a good position on that market offering significant growth opportunities. If you look at the per capital expense, France is below Germany, England. And so we have more potential than other European countries in France. And of course, we have two advertising agencies, TF1 and Unifi. And thanks to that, we can broaden our revenue sources advertising revenue sources. TF1 is also next to the flagship. You have two boosters to have this three hull Tremoran, if I can use that comparison, we, of course, are boosting our production and distribution activity, especially with Nguyen, because we have more visibility, longer cycles. And we have our new digital business that is developing. And thanks to that, we can offer an additional offer for web surfers, and that means there's also an offer for advertisers who can now gain new grounds in the digital universe, which is enjoying significant growth. Moving on to Bouygues Telecom now. In 2018, our commercial momentum continued with both mobile and fixed lines. In the mobile business, we gained an additional 2,000,000 customers in 2018, including five and eighty seven thousand in Q4. At end December twenty eighteen, the total customers we had as many as 16,400,000 customers for mobile. If you remove machine to machine, the contract the number of contract customers was 10,900,000 customers with 573,000 new customers in 2018, including 121,000 in Q4. Regarding the fixed telephony, Bouygues Telecom sped up its gains of new customers in FTTH with an additional 102,000 customers in Q4. That's the best quarter ever since fiber was launched. The penetration rate of FTTH, the orange curve, doubled in one year. We have as many as 569,000 customers FTTH customers at end twenty eighteen. Fixed customers we have 3,700,000 customers at end December twenty eighteen, up 235,000 year on year, including 73 new customers in Q4. Of course, we're trying to reach out to the largest possible number of customers with high speed. We have secured 30,600,000 new premises. Secure means that the contracts that we have mean that we can develop and market these premises once they are connected. We're looking here at 10.6 additional premises compared with last year. We are looking at 7,200,000 marketed premises over the year, so 3,200,000 more than last year. And in Q4 twenty eighteen, Bouygues Telecom secured 100% of the access to the high density area, thanks to an agreement, a partnership agreement with the CityFAS concerning as many as 3,400,000 premises. Now that is City Pass is held jointly by Mirova and Bouygues Construction. We have an agreement with them. So the objective is 12,000,000 premises marketed by end twenty nineteen and twenty million by 2022. We can confirm that objective. The next slide is a bit complicated, but we've got at this because some there was some misinformation about the way this business works. Maybe they misunderstood, maybe they were doing deliberately, but this is how the very dense area is addressed. This is different from our competitors. There's two approaches there. 50 of the business, we have agreements with SFR, mostly SFR and some agreements with Orange, there's co investment and that's fixed cost. This is CapEx, but it's a fixed cost, meaning that the more customers we have, the lower the unit cost. The other part, 50% of the very dense area, that's agreement with CityFast. And that means we can access the network for as long as thirty years. This is an annual fixed cost, but that's passed as OpEx. It's fixed OpEx, again, meaning if you look if we have more customers, well, again, the unit cost comes down again. So in both cases, both in very dense area, unlike what our competitors have been saying, we're looking at fixed costs both in some on OpEx and the other half in CapEx. But in both cases, the more customers we have, the lower the unit cost. But that's very much in line with our competitors. But back to the financial performance. EBITDA was up €171,000,000 over the one year at €1,268,000,000 The EBITDA margin almost 30%, up 2.8 percentage points, and this is thanks to the Service revenue, up 5%. And also, we were able to keep our cost structure under control. Current operating profit stood at €431,000,000 up €111,000,000 Regarding operating profit, that included €250,000,000 in nonrecurring income to do with the capital gains of disposals in mobile and FTTH infrastructure. Gross CapEx stood at €1,200,000,000 as expected. And free cash flow was €188,000,000 up €131,000,000 So Bouygues Telecom is in a good position to reach its objective of €300,000,000 in free cash flow by 2019. This is something we announced announced as early as 2015. What are the strategic dimensions of our approach? Well, we want to differentiate our offer with experience. We have reliable networks. We want to boost regional development by bridging the digital divide and developing our B2B business. So how to improve customer experience? Well, as part of our strategy, what we propose to do at Bouygues Telecom is to stand out from the competition. As many as 200 projects were started to improve customer experience and meet customer expectations more rapidly. There are many areas that have shown up where there is room for improvement to improve customer experience. That includes the promise of having Internet no matter what with what we call the four gs boxes that can make up for the lack of network or we extend the working hours so that customers can call at later in the day to talk to someone. We want to be able to improve that experience. We'll have by 2023 as many as 28,000 radio sites. And as I said, we have 12,000,000 FTTH premises marketed by 2019, so 20,000,000 by 2022. So we'll have all these transmitters to cover even remote areas. And we've been recognized as the number one network in rural areas, number two on average in France according to the latest RCEP survey that was conducted in October 2018. Now we want to step up our B2B business. We proposed to broaden our market share in companies. Well, we only have 3% as we speak. So for the fixed business, so that means there's a huge potential. We're looking here at a market which is now which only has two main players. We proposed to improve our presence well, to capitalize on our presence in mobile to extend our reach in fixed. We provide equipment to one company in three on the carrent and 3% of medium sized companies. And so we can develop that business. We have partnerships to look at various areas related to B2B telecom in security, digital and cloud computing. We also have developed what is known as fiber to the office, FTTO, for both mobile for the fixed business in SMEs. And we have acquired Kayo to do just that, but we acquired Nerim this morning, you may have heard in the news. So for this to happen, we have a dedicated structure of 1,300 people working because the B2B universe is rather different than the general public universe. You need lots of more customized approaches, which is not the case for general public. You need to have distributors. These are specialized people who can sell specific technical solutions. We have an international alliance with Telefonica to again reach out to major international accounts because Bouygues Telecom is only present in France. And that means that we have a higher satisfaction rate amongst our customers for small and medium sized companies. Indeed, big companies, the NPS score is much better than that of our competitors according to the latest survey conducted the ENOV survey that was conducted in October 2018. Now Philippe Marien has the floor for the financials. Good morning, ladies and gentlemen. Just a few words I'd like to add on our financial statements. Sales up 8%, reported up 8% largely due to the acquisitions we made in 2018 because on a like for like basis, growth was actually 3%. Current operating profit at EUR 1,511,000,000.000 is up EUR 105,000,000 by comparison of 2017. Now this figure includes a major transaction at the end of the year, namely the sale of the 49 in the share capital of Axione to Mirova. This had two consequences: the capital gain on the sale of the shares themselves and a reappraisal or remeasurement of the remaining 51% that we have retained in Axione. Given the valuation of this disposal. In 2017, we had a similar transaction with Nextdoor. Nextdoor is the subsidiary owned by Bouygues Immobilier in Cowal Kings. As I said earlier on, if you restate the figures for these two transactions, one in 2017, one in 2018, our current operating profit actually rose EUR 27,000,000. This is because of the fact that the 2018 was more satisfactory from the operational point of view than we expected at the end of Q3. We announced to the markets that given the difficulties we had with the three projects at Bouygues Energy and Services and at Colas Rail that we expected current operating profit to be stable or fractionally down. In actual fact, current operating profit rose independently of these two disposals. Other operating income of profit, $265,000,000. Now this mainly includes the EUR $250,000,000 capital gain at Bouygues Telecom, capital gain on the sale of mobile sites in the framework of its agreement with Cellnex. So operating profit, EUR $257,000,000. Cost of net debt, slightly lower than last year, which has an impact on wealth, financial income is freshly higher, financial expenses is freshly lower. Income tax was up to EUR $427,000,000 due to the improved operating profit, of course, which gives us an effective rate of tax of 27%. Now if we restate that rate of income tax for Axione, which had a very low rate of taxation and apply it to the outstanding equity stake, the effective rate of tax will be 29%, which is very close to a normative level of taxation. Share of net profit of joint ventures and associates, $3.00 3,000,000, mainly Alstom's contribution of EUR $230,000,000, a figure that we already knew at September 30 because our share in Alstom is known from the moment Alstom publishes its results, in other words, at the March and September. So nothing new since the start of Q4. Overall, net profit up substantially at 1,311,000,000. Now restated for all exceptional items, non current operating items, capital gains on disposals, the Axione transaction in 2018. And if we can then compare, also restating for the transaction in 2017, you'll see that the group's net profit attributable the group is actually up €139,000,000 which is in line with what we announced at the start of the year because in early twenty eighteen, we told the markets that our goal for 2018 was to improve the group's results, which we have achieved despite the difficulties announced in the third quarter. This brings me to the balance sheet. Obviously, acquisitions have had a major impact on the balance sheet. Miriam McAlles at Alpiq Engineering and of course, Aufeminin in the case of TF1. Noncurrent assets rose by over EUR 1,800,000,000.0. That property, plant and equipment rose EUR $774,000,000, of which EUR €400,000,000 were due to the intangible fixed assets at Bouygues Telecom. This is the investment we made in the networks, both mobile and fixed, by the way. The remainder, the €317,000,000 outstanding, being due to the booking of fixed assets at Miller McAsphalt, Alpiq at Ofemina, now carried on the Bouygues accounts. Likewise, with goodwill, which rose quite substantially by over EUR 900,000,000. That includes, of course, the three acquisitions which led to this acquisition this increase in goodwill, EUR $563,000,000 in the case of Alpiq EUR 90,000,000 in the case of MacLeod MacGafford and around €200,000,000 in respect of Aufeminin joining Tier one. Investments in joint ventures and associates rose by €131,000,000 of which over half, 76,000,000 to be more precise, are because of the Axione transaction. Axione was a wholly owned subsidiary of Bouygues Construction, so fully integrated. The disposal of a 49% equity stake with a shareholder impact, whereby we are jointly managing with Monrovia. So even though we have a 51 stake in Axione, it's no longer fully integrated. It is consolidated by the equity method. So these assets are now further down the balance sheet in fixed assets under from fixed assets rather to joint ventures and associates. So the considerable impact of these three major acquisitions on noncurrent assets. This brings me to current assets. The net is down, but there are two country trends here. Current operating assets rose by over EUR 1,100,000,000.0. This is because of inclusion of certain acquisitions in our scope for consolidation. And of course, cash on the country has decreased by almost EUR 1,900,000,000.0. This is because of the acquisitions carried out during the period in particular. Third impact on the balance sheet this year. We're not talking about acquisition this time, but about disposals. EUR $332,000,000 in assets and operations held for sale. These are the SMAC assets, SMAC being the Colas titans entity that we decided to sell before the end of last year. Now you will have read last week that the sale has been agreed, it's been signed, And this business will be closed out or the deal will be closed out in the next few weeks. But all these SMAC assets are now carried for 2018 under assets held for sale. The EUR 38,000,000 back in 2017 were the remainder of the mobile sites not yet sold to Cellnexed. They have since been sold in the course of 2018. Shareholders' equity. I think the variations are could be called customer. Over the period, there's a net profit of EUR 1,450,000,000.00, which increases the shareholders' equity, dividends paid by Bouygues to minorities at Colas, TF1 and Bouygues Telecom for a total decrease of shareholders' equity by EUR $712,000,000. Capital transactions increased shareholders' equity by EUR 169,000,000. This was the employee share ownership program that we launched for 150,000,000 in late twenty eighteen and the exercising of stock options over the year 2018 financial period. These are three conventional items under shareholders' equity. Two less usual items are, on the one hand, the non negligible impact that we knew about in September. You will be surprised the non negligible impact of applying two new IFRS standards on Alstom, IFRS nine and IFRS 15, the biggest impact being that of IFRS 15, which changes the way revenue is recognized at Alstom. Up to now, Alstom recognized its revenue on the basis of milestones or key events regarding the completion of its work. But under IFRS 15, now needs to change the way it books revenue. It's based on advances on sales now. Because of this because of IFRS 15, Alstom was somewhat ahead of the new system, but this now has to adjust that figure. This, of course, has a EUR 152,000,000 negative impact on shareholders' equity at Bouygues. But this is something we already told you about at September 30. On the other hand, there's another impact on shareholders' equity at Aufeminin this time to buy out noncontrolling interests. Noncurrent liabilities includes noncurrent debt. This is long term debt, which is down EUR $711,000,000. But it's down EUR $711,000,000 because, first of all, we have reclassified our bond, euros 1,000,000,000 bond in October, which is no longer under current liabilities but under noncurrent. Secondly, this affected TF1 in the quarter twenty eighteen, TF1 bought out the minorities in Nguyen. This amounted to EUR 100,000,000 at the 2017. So again, EUR 100,000,000 decrease on 2018. However, 400,000,000 increase in long term debt at Colas. This was because of the acquisition of Miller McAsphalt. Now liabilities related to upper assets held for sale. This is smack a total of €325,000,000 All this leaves us with net debt of €3,657,000,000 I now propose that we look at how this debt varied over the 2018 financial period. Our net debt was EUR 1,900,000,000.0 at year end 2017. Since then, we have made acquisitions for a total of approximately EUR 1,500,000,000.0, the three big ones being Minamba Gasphalt, Alpiq and Ofeminin. With Ofeminin, a number of smaller acquisitions, including Doctisimo more recently. But capital transactions for €162,000,000 this is the cash counterpart of Bouygues Confiance d'Ise, the employee share ownership scheme and the exercising stock options over the period. Dividends paid out EUR $712,000,000, which we talked about under shareholders' equity. The final installment of frequency acquisitions, that's a 700 megahertz frequencies for EUR $111,117,000,000. And operations generated EUR $440,000,000 in cash. That is an increase of EUR 110,000,000 over operations in 2017. Looking now at how this cash was generated. The breakdown is our net cash flow was up by EUR 200,000,000 to EUR 2,488,000,000.000, driven largely by improved cash flow at Bouygues Telecom. CapEx for almost EUR 1,600,000,000.0, up EUR 151,000,000 over 2017, and I'll elaborate on that in a few seconds. And a change in working capital requirements, which used up EUR $475,000,000 in cash. We actually consumed less cash than we did in 2017, all of this enabling us to improve our operating cash flow by EUR 110,000,000 compared with 2017. I said I'd elaborate on CapEx. Here's the breakdown by business line. Most of the increase in 2018 was Bouygues Construction for February well, Bouygues Construction business, rather, almost EUR 500,000,000, Bouygues Construction almost EUR 200,000,000, in line with what we told you early in 2018. Gross CapEx of slightly over 1,200,000,000.0, very much in line with what we announced. In construction, two scissor movements here. Reconstruction is really the reflection of the phasing in of the major contracts. Most of the investments in Reconstruction, what's important, causes variations are the major equipment, idle equipment for large projects. But because of the coal ash high, there was also a turnaround of the business, which was partly due to the decrease in freight business and the disposal of a number of locomotives by Colas Rail, which substantially reduced net CapEx. One final technical point for a change, one I need to explain to you because from January 1, we are obliged to apply IFRS 16, which is the IFRS standard on lease obligations. It means that leases actually increase assets on the balance sheet while creating debt. So it increases assets, but also increases liabilities. And on the income statement, converts rent into amortization plus financial expense. As this has come into force since the 01/01/2019, all year, we'll be presenting with accounts that apply IFRS 16. You'll find in the attachments, you'll find the accounts that we have on the website. We'll be giving you this breakdown quarter by quarter, which will enable you to compare 2018 with 2019 on a comparable basis. So you'll see that our EBITDA increased by €367,000,000 almost by miracle because rent is no longer considered a cash out, certainly not by the powers that be. So our EBITDA mechanically increased by €367,000,000 which is the amortization of rent or the amount of rent that is amortized. Conversely, current operating profit will increase by EUR 53,000,000, EUR 53,000,000, which actually corresponds to financial expense because the financial expense on leases will now be carried under financial income and expenses, which will EUR 53,000,000 more. Operating profit, exactly the same, plus EUR 53,000,000. The cost of net debt will increase by EUR 57,000,000. Well, the financial expense on leases will actually be carried under the cost of net debt. And net debt itself will remain virtually unchanged, giving a few small restatements, the type of amortization and the share of amortization on leases. There's only a very tiny adjustment that needs to be made here. Finally, our net debt will increase by EUR 1,600,000,000.0, which is the corresponds to the current value of the assets that we are leasing. Actually, you a better grasp of IFRS 16. You may say, well, I don't understand why when we adjust for the impact of IFRS 16, we are adjusting by EUR 1,591,000,000.000. But when we do the opposite, when we neutralize the impact of IFRS 16 in the accounts for twenty eighteen, the impact is EUR 1,636,000,000.000, not the same figure. But the impacts are different because before applying IFRS 16, financial lease was already included in debt. Financial leases were already included in debt. So the new impact of IFRS 16 is EUR 1,591,000,000.000, but the total impact of IFRS 16, which is all leases, is actually over EUR 1,600,000,000.0 because we already included this in our previous accounts. Let me reassure you straight away. And so far as all these figures are totally meaningless to us, because a lease involves money being paid out, no matter what you want to call it, we will continue to publish all our subtotals and totals on two lines. So before application of IFRS 16 and after application of IFRS 16, which means we'll be in compliance with accounting standards and principles, but also report accounts that make sense, particularly as regards cash outs. Martin Wieg will talk to you about this when he talks about the outlook. But from our point of view, free cash flow generated is essential. And in generating free cash flow, well, a lease means money leaving the company. That's it. That's what I can say about the accounts as of September 30 December 3138, and the application of IFRS 16 from this year onwards. A few words about the outlook for 2019. Thank you, Philippe. I propose to wrap up by saying a few words about our prospects. Well, the group's activities are really marked by four major trends that we are concerned by. There are many others, I'm afraid. The first of these major trends is the population growth. Second is urbanization and climate change too. Digital transformation and changing behavior, that's the world the underlying trends of the world in which we operate. This is our playing field, if you like. For our businesses, these underlying trends lead to strong worldwide demand for increasingly complex projects, more integrated offers, more and more requirements in terms of maintenance, particularly in construction. This has also led to a significant appetite for premium and exclusive video content, which can be converted to value through data analysis. And of course, there's fixed and mobile usages are soaring in B2C and B2B. So we will try to take up these challenges and ensure that we take advantage of upside potential in the long term. In this broader context, we are expanding into more strategic, more value creating activities close to our core businesses through organic growth, of course, or from time to time, as Olivier has said, in the form of acquisitions, as Olivier told you earlier this morning. In construction, we plan to expand in higher value added businesses such as urban development, eco neighborhoods, smart cities, energy and services, industrial activities such as aggregates and bitumen or smart roads. And you know that Colas has done a lot of work in the field of smart roads. In telecoms, we plan to continue to expand in fiber, fiber to the home and B2B, of course, focus on digital and content production and distribution in media, thanks to partnerships like Mirova. We as I said, we'll reinforce our presence in digital and of course, continue to produce and distribute content. At the same time, we are disposing of less strategic assets as illustrated by the disposal of SMAC from Colas or the disposal of TF1's teleshopping. Now to shore up this strategy, we are anchored around two pillars. The first of this is the know how, the expertise of our 129,000 employees. As you know, because of the type of business we're in, our human resources are our main resource. Their know how, their commitment, their involvement are, I think, a prerequisite if we are to succeed. I'm very happy to be able to tell you that for the second year running, Bouygues has been voted the top employer for all its businesses, the only group in France to have received this certification for all its subsidiaries. The second pillar, shoring up our, anchoring our growth, is our portfolio of innovative solutions, socially and environmentally responsible solutions. WIG is ranked in the main sustainable development indices, as you can see on the right hand side of the slide. And I think that's very important in this day and age. Now in 2019, the group was included on the Carbon Disclosure Project list, which distinguishes the most active companies in fighting against climate change. This year, over 6,000 companies and groups worldwide answered this questionnaire from the CDP. Only 126 out of 6,000 were classified in Group A, and we were one of those. This, I think, really crowns our low carbon strategy, energy and climate strategy as well. Given this given all this, in 2019, the group should improve its profitability and Bouygues Telecom should generate EUR 300,000,000 in free cash flow. You will remember that's a guidance that we've already mentioned before. Within two years, the group should improve its free cash flow generation after working capital requirement to reach EUR 1,000,000,000, thanks to the contribution of all three sectors of activity. May I remind you that one of our main objectives is to create value and generate free cash flow over the long term and consistently. So we feel it's relevant to set ourselves a goal for the group. That brings me to the end of this presentation. Along with the heads of the various business segments, I'll be very happy to try and answer your questions. Thank you. Thank you. Josep Pujal from Caspar Lepreux. Two questions. Number one, on your guidance, euros 1,000,000,000 in free cash flow in two years' time. What working capital requirement what change in capital working capital requirement do you see for that to happen? And what about CapEx in telecom? And another question about Bouygues Energy and Services, B Y E S. Has this business been identified as a promising business where further investment is planned? Or is it was that specifically well, was Alpiq an opportunistic operation, a one off thing? But in any case, can you give us an idea, an order of magnitude for the company in three or five years' time? And then another question still about BYES, what's the profit margin today? And what's the sort of number you'd have in mind in the medium term. So regarding BYES, we would not have acquired Alpiq had we not believed in the future of this business. What it is, is that Bouygues Energies is service to my mind has huge growth potential and can offer huge growth opportunities for profit margins in the construction business. There is room for improvement in terms of organization in choosing market areas, both in terms of business and profitability. In terms of the expected margin normative margin, as you say, I cannot give you numbers. But if you benchmark against other similar companies in France and Europe, there's no reason why we shouldn't be able to do better as well. Regarding capital requirements working capital requirements and the EUR 1,000,000,000 free cash flow figure, Philippe Marien will give you details. Now it says EUR 1,000,000,000 in free cash flow after WCR is based on this. In 2019, we are looking at capital expenditures to the tune of €1,800,000,000 in 2019, so more than what we did in 2018 where it stood at 1,600,000,000.0 At Bouygues Telecom, we're looking at slightly less by way of capital expenditure. As we said last year, we will be sticking to that. We were looking at slightly under EUR 1,000,000,000 in CapEx for Bouygues Telecom. By contrast, there will be higher CapEx both in the construction business. Colas had lower CapEx this year because well, net CapEx because it disposed of significant equipment, but that won't happen again. And Nguyen, we might increase CapEx at Nguyen, but you will see that higher CapEx in Nguyen means higher EBITDA as well. So €1,800,000,000 in capital expenditure. And the changing WCR, well, we want to make that as good as possible to make that €1,000,000,000 mark, I mean, because that's after WCR. Nicolas Abies from HSBC. I have two questions on Bouygues Telecom. On the size effect in fixed lines, we're looking at 4,000,000 subscribers. In cost in view of variable costs in co investment, why do you believe that it is preferable to have higher volumes rather than reduce discounts to ensure growth. And in terms of production, there's a new management team. Will this entail new costs related to the central functions? And does this mean you will be more selective in terms of construction projects? Now regarding the construction projects, there's no major change in line. We are constantly trying to adjust and make the right move. But it's true for all three business areas. It's been going on for the past sixty seven years. We're constantly adjusting. Let me remind you that the group has been around sixty seven years. For the past sixty seven years, we've been constantly adjusting our structures and organizations to arrive at the best possible results. By and large, we've done fairly well. But regarding Bouygues Telecom, Olivier and Rousseau will can we give the microphone? I think it's best since it's just the three of them sharing the microphone, they might leave it amongst themselves. Olivier and Rousseau, as Martin was speaking, I forgot the question, I had to ask my colleagues what the question was. Yes, you're talking about race to well, trying to get as much volumes as possible. We did much less by way of promotion in Q4 than in previous years too. So we were not trying to reach out to more volumes by offering discounts. We want to take our fair share. In terms of FTTH, they are high fixed costs, but that is our territory. And the higher the number of customers, the lower the unit prices, so that means more profitability. But where we do not have adequate customer base as well, that's where we decide to go for variable cost because that we can that is the only way for us to bring our costs down where we do not have a sizable customer base. Yes. No further questions? Surely. Yes, a question at the back of the room. Yes, I'm from Garnier. I have a couple of questions. What do have to say about Alstom after the failed merger with Siemens? You said that if the merger went ahead, Bouygues had no reason to remain a stakeholder in Alstom. What's the view position now? On telecom now, there's lots of talk Bouygues Telecom's growth in less dense areas. Where do you stand in terms of rolling out your equipment in these less dense areas? And in view of the growing role of B2B in Bouygues Telecom, do you have any ambitions in terms of growth, profitability compared to what you have with B2C? Regarding Alstom, just like the rest of you and many of you shared their concern, indeed their dismay, when they saw the European Commission's position. I must say, I could not understand that position. I believe it is extremely strange. This is a sort of a lose lose deal regardless of what happens in the next twenty years for both Alstom and Siemens. Of course, the European Commission will have to take responsibility. That's a bit odd. The idea is to make it more advantageous for European consumers. Putting the European consumer in the hands of a Chinese giant may not be in the consumer's best interest, but I'm just a humble industrialist and I do not claim to have the same wisdom as a commissioner in Brussels. Having said that, I would like to pay tribute to Henri Poupar Laffage, who is Alstom's CEO. He's done a remarkable job. You have to become aware of these surreal procedures. For eighteen months running, there you have a company in limbo. Its relations with customers is highly complicated because for one years, point it's pretty difficult to convince your customers to go ahead and buy a product if you don't know what the future holds for that companies down the road. Now for all the employees of the company, that was a period of very unpleasant uncertainty. And I would like to say that at Alsom, Henri Poupar Laffage and his aides were able to handle this quite remarkably. And as you know, performance are quite remarkable. It's true for sales, for revenue, but it's also true in terms of financial performance. And if you look at order book and backlog, we're looking at five years' worth of orders. So there's no concern. There's no urgency. We are confident shareholders standing by Alstom's management. We have two representatives of Bouygues sitting on the board, as Philippe Marien said earlier, so there's not much to add. But regarding Bouygues Telecom, Olivier, Hussain will tell you more. Yes, regarding the work that we have with the Creusel that enables us to be in rural areas, having rolled out that network, we see improved presence and growth because we are twice we're expanding twice as fast in these areas than in other areas. The reason for that is that we've opened new shops, thanks to FNAC because FNAC, the retail stores, opening Bouygues Telecom stores in these areas. And we have also agreements to increase the points of sales, so we are more present. Regarding B2B, we showed you in the slide that we're in a very small position. We only have 3% of the market for the fixed line business, which means we have huge potential because we only have two competitors. But we will not give you guidance, but in the absolute, yes, we can do better. Thank you. You. Have we another question? Here. Remy Adan from ODDO. I'd to come back to the B2B. Why do you think you're accelerating now, particularly in B2B? And with a market share of just 3%, could you give us some idea of what your ambitions are, what you're aiming at in terms of market share? In a market that's not very fluid, do you plan to acquire market share through acquisitions or is there enough room for organic growth? Well, in 2018, our growth wasn't in the form of acquisitions. We grew thanks to major input in mobiles, fixed B2B, and I think Richard would say a few words about that. Bouygues Telecom's organic growth in B2B is significantly higher than Bouygues Telecom on average. So the B2B is posting the highest growth for simple reasons that Olivier and Martin both explained. And so far as our market share is very low, we have a lot of upside potential. Now when I say our market share is low, in mobile, we can have 20% in B2B. We have three in fixed lines B2B. There's no reason why in fixed lines, we shouldn't be close to the market share we have in mobile. That's the first point, but so a lot of positive outlook Remember, the value in B2B is much higher than in mobile, right? Fixed is much higher than mobile. Secondly, why are we accelerating now? Because a certain number of companies may be small but are mature in their sectors and have come to realize that it is important to have fixed and it's important to have infrastructure to sell end to end solutions. We're in a very strong position. They can't go to Orange. The choice is between SFO and Bouygues. And I think recent statistics would have it that they prefer to join Bouygues Telecom because our prospects and rationale is one of growth and one of continuing with these companies. In B2B growth, the quality of the network is essential. As you will have seen, the quality of our network is particularly good, has us very well positioned, and this is an essential criterion in our clients' eyes. Next question? Nicolas Didjot. I have three questions. First one concerns the flat OpEx outlay with CityFast. Could you give us some idea what that total operating expenditure would be in the what's the full impact on EBITDA? Is it an exclusive agreement, by the way? My second concerns the operating leverage in telecom. We're not far from 100%. Could you give us some idea of what the main contributors to margin improvement will be? My third question concerns the operating margin in construction. After the blip in Q3, we finished the year at 2.9. What is if not the deadline, let's say, when do you expect to reach that margin guidance? Well, that's something we never disclosed, so we're not going to change now. As for the rest, well, Olivier will answer you. In the case of Cityfast, we don't give the amount of the agreement. It's not an exclusive agreement, by the way. Cityfast is an operator that was set up by Mirrova and Axione, from whom we buy services, but they can also sell to other operators. However, we do not give any figures on this agreement. Okay. Well, if there were no more questions, maybe I could answer a question that you didn't ask me before wrapping up. What about consolidation in the market? Anybody interested in that? Any takers? For analysts like you, I mean, that could be of interest. Now I'd just like to say a word about that. It's something that may be of interest to some of you. We have not we're not in contact with anybody. And, insofar as if anything is to happen, it would at least lead to, somebody contacting us. We haven't been in touch with anybody. That's, for the record, that's a fact. Secondly, at some point in time this year, we will embark upon a period called a complete lockout. In other words, operators will not be authorized to talk to one another. Insofar as frequencies should be attributed, the details of attribution have yet to be decided. But during that lockout period, well, there will be nothing happening. That's what I wanted to say. Thank you for coming. Thank you for being here. And I hope we will meet again very soon with very good news. Why not? Thank