Earnings Call: Q2 2018

Aug 30, 2018

Okay. Ladies and gentlemen, it's always a great pleasure to welcome you here. The holidays are now behind us. In fact, it's all the greater pleasure to tell you about our accounts that as you'll see, they are broadly speaking good and that our prospects are good. Okay, the highlights. First of all, our good commercial performance and the sustained or robust growth of the results at Bouygues Telecom. Backlog in the construction business is at a record level. This is after a first quarter, which was adversely affected by poor weather in Europe. The current operating profit improved in the second quarter year on year despite strikes in the French railways and the difficulties in completing three energy and services projects. As you know, with the French railways SNCF COLA, in fact its subsidiary Cola Surrail does a lot of work for SNCF on either new work or maintenance as there's a reconstruction, but during the strikes when work stopped, obviously, the supervisory staff at French Airways was absent on strike, so it wasn't possible to continue. And of course, this did, of course, adversely affect our performance in this field. Here you have the group's key figures. In the first half year, sales amounted to 15,700,000,000.0, up 4% year on year. Now this is a reflection of good growth in France, solid growth in outside of France on a like for like basis at constant exchange rates. So sales rose 5%. This was obviously affected by EUR $350,000,000 in currency translation, particularly because of the strengthening of the dollar against the euro. It was also affected by a positive scope of consolidation impact due to the integration of Miller McAsphalt, which we've told you about before, integration by Colas and Aufeminin, which was integrated by TF1. The group's current operating profit amounted to EUR $3.00 3,000,000 in the first half against or versus EUR $347,000,000 for the same period last year. This is a reflection of the continued profitability at Bouygues Telecom, but also current operating profit in Construction business, which was adversely affected by poor weather in Europe, as we said, in the first quarter of this year. Operating profit was up EUR 4,000,000, and this includes the capital gains from the sale of CELEX sites or sales to CELEX by bouyguestelecom. Net profit attributable the group was up 18% to EUR $260,000,000 restated for nonrecurring items. It was up 6%. The group's financial structure is robust. Net debt at the June 2018 was up EUR 800,000,000 year on year, and this includes the cost of the acquisition of Nern MacAsphalt by Colas and the acquisition of Aufeminard by TF1. This change in net debt, I think, also bears the signs of the highly seasonal impact on Colas' business. At the June 2018, net debt does not include the acquisition of Alpiq Engineering Services by Bouygues Construction and Colas. This is an acquisition that was split between Bouygues Construction and Colas, as you know. Overall, this acquisition amounted to CHF $850,000,000 in terms of enterprise value. Moody's has increased our credit rating from a Baa1 Basel outlook to A3 with a stable outlook that was on the July 5. Standard and Poor's, well, on the July 12, Standard and Poor's maintained our credit rating of BBB plus with a positive outlook. That's been maintained. And on the right hand side, you have the main changes in shareholders' equity, net debt and gearing. I'm now going to give the floor to Olivier Roussard to tell you about the our review of operations. Good morning, everyone. Starting with construction on this slide, you have three productions by the group. On the left hand side, the site of Line 14, a metro line as part of the Grand Paris project. It was built by Bouygues and the tracks by Colas. On the right hand side, have the racetrack, that was done by Colas. And in the middle, have a building, it was developed by Bouygues Immobilier. The headquarters is the building houses the headquarters of Colasse and it was built by Bouygues Construction. So that brings us all three businesses together. Regarding the backlog at end June twenty eighteen, a record high €33,700,000,000 up 9% compared to end June twenty seventeen, up 13% on a constant exchange rate basis. It includes €800,000,000 from Miller McAsphalt, which we didn't have last year. If you look at the breakdown of the order book, you can see that 57% of the orders were achieved internationally compared to France. So that's a stable proportion compared to last year. In France itself, business goes on pretty much as usual. We have a 8% increase in the backlog in France, EUR 15,800,000,000.0. A few snapshots sites in the provinces, we built the future headquarters of the Metropole de Lille, they used to be intended for the European Drug Agency. In the end, it is the municipality of Lille which will take it over. Then we have the streetcar Angers and then you also have the chemistry pharmacy and biology university in Angers and then a hospital in Mobes. Internationally, well, we're very well positioned in a buoyant market. So you can see where we are located around the world. But because we choose our territories where we have good orders, have €17,800,000,000 up 11% over one year, up 17% on a constant exchange rate, not including foreign exchange and not including Miller McAsphalt, which still be up 12% compared to last year. And you have a few examples of projects that were well, bids, if you want, in Q2. Canada, we have the repairs on Highway 401 And 402 in Canada. Then we have the Innovation Centre at Cardiff University, EUR 134,000,000. And at the top, you have electrical work and IT in Calgary, If you look at the key figures for construction, sales stood at EUR 12,100,000,000.0, up 4% compared to last year, mostly thanks to the good sales performance of all business construction businesses on a like for like basis and constant Forex, it would be up 5%. The weather conditions were very negative in Europe, that was Q1, but thank God that is behind us. In Q2, we have a $6,000,000 increase compared to the same quarter last year. And that means that there's a strong improvement in the operating profit by Bouygues Immobilier. LaRoute at Colas, good performance there and that more than made up for the negative factors, the strikes in S and C F, which was negative for the freight business of Colas High and the work business by Colas. There were three businesses in three projects in The UK and Ireland in energy and services which encountered difficulties. If you left that out, if you the operating the current operating profit for Q2 would have been 4.1% over that quarter. And in the end, the prospects for improvement in both operating profits and operating margin, This outlook has been confirmed for the year 2018. Turning to TF1 and of course the victory of the French team at Football Cup. Gilles gave you the numbers recently, so we'll go quickly over this. The sales stood at EUR 1,043,000,000.000 and that's because of the good performance of the free to view channels and the revenue streams from TF1 premium. That's the first time we have this. We have a operating profit at 101,000,000, down EUR 7,000,000, but that's because in Q2 we had the cost of the World Cup and that was EUR 46,000,000 alone. But that was essentially compensated by a control of programming costs and more revenue from production. All in all, the current operating profit stood at 9.3%, down 1.1 over one year. But if you factor out the World Cup to have a comparable basis, it would have been 13.1%. Operating profit stood at EUR 19,000,000, but that included EUR 11,000,000 in one off expenses that is mostly the depreciation of the audiovisual rights acquired when we purchased Newn Studios. If we look at Bouygues Telecom, we have, of course, a good sales performance and a good financial performance, starting with mobile phones. Growth continues in the mobile business, carried with new offers, BNU and Sensation that were launched in Q2. Q2 was, say, a very busy month. We have an additional 900,000 customers in H1, including almost 450,000 in Q2, I beg your pardon. So we have almost 13,000,000 customers in mobile. On the contract plans, we have 120,000 customers in Q2, 250,000 in H1 twenty eighteen. Looking at the coverage in mobile phones, so you may know about a pooled network project that started in 2015. That pooled network means that we have extended Bouygues Telecom's offered coverage and we have new catchment areas in areas where we used not to have any customers or prospects. And so we're in a better position to sell our offers. At end June twenty eighteen, eighty two percent of that network was rolled out. We have about 10,000 sites. And by the end of the year, 95% of the project will be rolled out. Let me just mention that when you look at the areas that have been covered since we started the project, on average, it was an additional 45% additional sites in those areas where we rolled out this pool network. We have extended the coverage considerably and that means extended the catchment areas as well. Once that has been completed and when we have rolled out the network, well, that's one thing, but we have to sell it and we have to tell our customers know that we are here in those areas where we used not to be. And then of course, we have to sell. So we use local retail and we can we have shops. But we also have an agreement with Fnac Darty and they these the Fnac Connect stores will be marketing our offers in H2. And this is how we'll be able to reach out to customers in these new areas. In the dense areas, we continue what we had a satisfactory network and satisfactory coverage, but because there's more consumption by customers, we are adding density and we're adding 50% additional sites, 2,000 additional sites by 2022 to ensure better coverage, better speed for customers. At the June 2018, Bouygues Networks covered 97 of the population, will have 99% in four gs by the end of this year and that will be made possible through the twenty twenty one thousand sites will need to provide that coverage. By end twenty twenty three, when all the network what we had a sharing of networks with Nudin and we'll have more than ninety nine percent four gs coverage, we are looking at almost 28,000 mobile sites. But even at the end of this year, 21,000 sites, that's considerably more than we had a couple of years ago. Now then, still in the mobile business, we are looking forward to five gs technology that will be marketed, that will be rolled out by end twenty nineteen or more likely 2020 when we have acquired the necessary frequencies. And meanwhile, we're preparing the network. One thing we need to do, first thing we need to do indeed is to ensure that the speeds made possible by five gs will indeed be available on the network. And that means we have to have fiber connections for all the sites, which is for the cities that will receive five gs in 2020. So we started this last year. This is progressing very well. And we've decided to build additional equipment because five gs, we have very short response times, but that is because five gs decentralizes the nodes of the network but that means we need to build an additional concentrators. These are small machine rooms that will host specific equipment and that is something we're doing right now so as to be ready for the rollout of five gs as soon as the frequencies are available. Still about five we are testing it out. We've actually had a pilot test in real life conditions. We're the first ones to have, I mean there were lab experiments but this is the real life conditions. We are the first ones to do this in Western Europe in the city of Bordeaux in July. And so we have actual sites using actual five gs with actual off the shelf software, not a lab experiment. And still in the group we have what is known as the SmartX five gs incubator. Now what is this all about? Well the idea is that five gs brings about new possible solutions, applications and uses and we are testing these things out in smart building, smart mobility, Bouygues Construction, Bouygues Immobilier and Colas, also smart entertainment with TF1. The idea there is to look at all possible potential uses of this new five gs technology. Now let's move on to fixed phones and NAND lines. Q2 was not as busy this year. In H1, good performance, an additional 91,000 new customers in H1, including 41,000 in Q2. At end June twenty eighteen, we had 3,500,000 fixed line customers. This growth again was thanks to FTTH. At end June, we had three and ninety one thousand FTTH customers, including 126,000 new ones in H1, including 62,000 in Q2 twenty eighteen. The share of FTTH accounts for 11.1%. Now for this to happen, need to be able to roll out FTTH networks and so two things, number one, we look at the orders known as secured premises and that means having agreements with our partners including PIN partners that own the networks or partners that cover certain areas. At end June, we had 25,000,000 premises secured, so that's an additional 5,000,000 compared with end December twenty seventeen. We have a partnership, an additional partnership indeed with Orange and that means we now have as much as 90% of the PINs, the public initiative networks that have been allocated. There's only one for which we haven't come to an agreement and that's SFR's. And at end June twenty eighteen, Bouygues Telecom has already had 5,500,000 premises marketed. That's an additional 1,500,000 compared to end December twenty seventeen. And our objective is to have as many as 12,000,000 premises marketed by end twenty nineteen and twenty million by 2022. We are present in 62 departements. So there's extension of these covered areas as well. We have EUR 2,600,000,000.0, up 7% million on our sales. Services and sales built to customers are up almost 5% in what was a very competitive market in Q2. That growth is attributable to, of course, the new offers we've been launched and so that is acquiring new customers. But also we've had price increases in May 2017 and that of course made a positive difference. One additional point about this new offers in mobile phones in Q2, we decided to divide out retail distribution channels. So BNU is only available on the internet so that the premium world is kept out as it were of the Internet universe. Regarding the online universe, regarding Bouygues Telecom now, the profitability EBITDA was up 12% to EUR $549,000,000 year on year, up 7.7 points and 26% I beg your pardon, 1.7 basis points up 26% margin. Operating profit is up 31%, $239,000,000, including EUR 104,000,000 of one off dues due to the capital gains on the Cellnex side sales and EUR 90,000,000 in one off expenses due to the sharing of the network. We have EUR $621,000,000 for the gross CapEx, which is in line with what we announced, euros 1,200,000,000.0 for the year. So we are exactly in line with the number we had announced. I'd now give the floor to Philippe Marien. Good morning, ladies and gentlemen. In addition to the copy that you received on arriving, you'll also find on our website the entire consolidated accounts and notes to the accounts for the group for the five businesses and for the parent company, Bouygues SA. Just a few additional comments on the accounts as of June 30. I'm not going to dwell on sales and current operating profit because Olivier has described them both business by business. Now other operating income and expenses was EUR 80,000,000 for the first half year, which includes the capital gains from the disposal of sites to Sandex, that's EUR 104,000,000. And the noncurrent charges on noncurrent expenses, including EUR 18,000,000 in accelerated amortization due to the network sharing with Rezo that Olivier also mentioned. This also includes EUR 11,000,000 in non current charges for the amortization of broadcasting rights subsequent to the acquisition of Nguyen. We had the same figure in 2017. This amortization will be completed this year for Tier one. The net cost of debt is down fractionally on the comparable period last year and financial income is up fractionally. Financial expenses are down fractionally. Working our way down through the consolidated income statement, 37,000,000 in income tax, which is a low effective rate of taxation at 20%. Remember that in 2017, we had the 3% tax on dividends. Now we didn't have this in 2018 because the budget law was modified in the meantime. So if we factor this 3% tax on dividends out of the equation, the effective rate of tax would have been 25% in the 2017, which is slightly below the normative rate. So in the various areas, we have produced good results in areas where the tax area of taxation is lower than the normative rate, particularly in France. Share profit of joint ventures and associates amounted to EUR 89,000,000, up very slightly on 2017 despite Alstom's contribution, which was up substantially to EUR 73,000,000, That was in the first half year, of course, up from EUR 45,000,000 for the same period in 2017. Same figure in the first quarter because, as you know, Alstom does not publish its results every quarter, only twice a year. It's half yearly and annual results. Unfortunately, this improved contribution from Alstom was partly offset by the lesser performance of the bitumen refining business that Colas has in Asia. The subsidiary in of Colas' equity interest in this subsidiary was impacted by Venezuelan crude oil, which it uses to refine its bitumen. Unfortunately, supplies were more difficult in the first quarter and, of course, had a negative impact on the production of TIBCO's bitumen, which, of course, resulted in its performance being slightly down in the first quarter. Overall, net profit through to the group of EUR $260,000,000, up quite substantially on the comparable period 2017. The interesting line here is the last line. That's the net profit attributable to the group excluding exceptional items, both for 2017 and 2018. Here you will see that to a lesser extent, this good momentum of our results is to be found here again. This is one of the elements that we gave guidance on for 2018. We are continuing to improve our overall profitability. A few words on the balance sheet now. Noncurrent assets, up substantially, up by 1,134,000,000.000, EUR $239,000,000 more in property, plant and equipment. This was mainly due to the investments made by Bouygues Telecom, which substantially increased its intangible assets alternative assets, I should say. The bulk of this, of course, the bulk of this increase was due to our two acquisitions, Mina Macassault, EUR $585,000,000 and Aufeminin for €249,000,000 This is the two main components of this increase in goodwill. One technical point here in the first half year, as we did at the March 21 and before attribution in September, the full price to be paid for Miller McAsphalt is at this point in time fully booked to goodwill, the full price. Now that will not be the case when we publish our accounts in September because certain components of the price would be reallocated to under other assets, not so at the June 30, technical point. This is a non current assets, well, mainly impacted, as I said, by these two acquisitions. Current assets now. Current assets were down EUR $2.00 5,000,000, two big changes here. Current operating assets up by over EUR 2,100,000,000.0 and cash down by over EUR 2,300,000,000.0. They're the two big changes. This was due to the seasonality of the Colas' business. These are quite substantial increases and decreases in terms of the actual amounts, but they are also very traditional due to the seasonality of Colas' business. One final point on the asset side of the balance sheet is the assets and operations held for sale. EUR 16,000,000 outstanding, this is the remaining sites due to be transferred to Cellnex. On the liability side, shareholders' equity down EUR $469,000,000. Here are the main variations, which are customary at this point in time. Net profit plus $312,000,000. The full dividend paid by Bouygues SA to its shareholders and by minority minorities at EUR $680,000,000 page. Capital transactions minus EUR 22,000,000. That is the net of the exercising of stock options in the first half year, which led to a capital increase. On the other hand, share buybacks, the balance of the two being minus EUR 22,000,000. Income and expenses, minus EUR 13,000,000 and scope effect of those minus EUR 65,000,000. Of these EUR 65,000,000, 76,000,000 were spent on buying out minority holders in minority shareholders in Ofemina, which was bought in three stages, shall we say. First of all, we bought over 78% of the share capital in from Axel Springer. Second stage was a tender, public tender, enabled TF1 to increase its stake in Ofemina to slightly over 93%. This will be followed up is being followed up, I should say, now by a certain number of transactions in the market to exceed the 95% mark in order to organize a compulsory buyout by Ofemina in the end of the year. The €76,000,000 decrease in shareholders' equity covers the full buyout of minority shareholders. This required that this debt to Aufeminin minority shareholders to be carried. Non current liabilities was up €942,000,000 This was mainly due to non current debt, mainly at Colas, which amounted to EUR 1,100,000,000.0. This is comes in two parts, EUR 400,000,000 debt increase due to the acquisition of Miller McAsphalt, the remainder being the usual coal assets usual drawdown on its medium term lines of credit or facilities to get over the usual decline in its cash position for seasonal reasons and in particular in North America. On the other hand, to be complete, slightly over EUR 100,000,000, 103,000,000 were reclassified. This is because we bought out the 30% stake in the minority's 30% stake in Nguyen, Fergus Larue and Associates. This liability was non current up to now, but insofar as the deal was completed in July, this liability becomes a current liability. So you have EUR 100,000,000 that's been reclassified under a current debt. This gives us total debt of freshly over €5000000000.5.04 Let's now look at the bridge to see how we got from 3,100,000,000.0 at the end of the year to over €5,000,000,000 at the June. This is mainly due to acquisitions, freshly under €1,000,000,000 overall, another €185,000,000 Oferminard, two ninety two million. These were the two big acquisitions. Other is the impact on cash of stock options exercised, share buybacks, $6.00 7,000,000 for dividends, which I've already explained, EUR $680,000,000 rather. And operations, which used up EUR 1,460,000,000.00 in cash. That is a standard customary and structurally normal at this point of year. But last year, this was higher by some EUR 400,000,000. Now if we take a closer look at this variation in working capital requirement, we have net cash flows up almost actually over 100,000,000 by comparison to same period last year. It's mainly Bouygues Telecom, which improved its net cash flow and Bouygues SA, which also improved its net cash flow. On the one hand, thanks to the tax savings because there was no longer a 2% tax on dividends, substantial amount nonetheless. And secondly, the decrease in financial expenses, which burdens which is a burden on Bouygues SA. We used up more cash because of acquisitions. This offsets or, let's say, compensates the increase in net cash flow. Nothing in particular. This is all about timing and phasing of investments. But overall, CapEx for the year will be, as expected around the 1,600,000,000.0 mark net, which will be at a comparable level to 2017. However, the important point here is the change in operating working capital requirements, which is less than last year by some EUR 400,000,000. This is because we in construction, we benefited from better terms of conditions of payment and better launches and start ups on a certain number of major projects at Bouygues Construction and at Colas. This is the immediate impact of the good order intake in the first half year, but we've already commented that in the operational review. One for CapEx, you have the breakdown, which I don't think requires any particular comments. We're definitely on course. One final point is the cash situation. Here again, not a lot to say. We have a very high level of cash with available cash of over EUR 8,000,000,000. EUR 6,000,000,000 in medium term facilities that have not been drawn down confirmed but not drawn down. A debt schedule which is mainly in the form of long term bonds, well spread over time as you can see and no particular redemption peaks at any point in time. That's what I wanted to say to you about our accounts as of June 30. Thank you for your attention. Well, you, Philip. And by way of conclusion, let me just make a few comments. The outlook is confirmed, as we said, we should be able to continue improving profitability throughout the year, number one, because both in France and internationally, we are in a positive buoyant environment. We will, of course, be selective looking more at profitable projects than numbers. Current operating profit and current operating margin are expected to improve in 2018 compared to 2017. TF1 has confirmed its targets to improve profitability. This year in 2018, we are expecting a higher current operating margin, leading out, of course, major sporting events. In 2019, we're looking at double digit current operating margin. And we have we expect the five free to air channels to account for about onethree of consolidated sales, and annual average cost of programs should be down to EUR $969,000,000 for the five unencrypted channels. Regarding Bouygues Telecom, we're looking at still profitable growth. The target for free cash flow is EUR 300,000,000 for 2019. In 2018, sales and services are expected to grow more than 3% compared to 2017, and the EBITDA margin should be higher than in 2017. Gross CapEx is expected to stand at about EUR 1,200,000,000.0. Now this is a calendar of future events. We have next events. We will meet on second October for Capital Markets Day for the construction business, but this is only for analysts and investors. This half day Capital Markets Day, we propose to introduce with the executives of Bouygues Construction Colas and Bouygues Immobilier. We will be there presenting a strategy in these three business areas, our long term outlook, looking at smart neighborhoods, smart cities, industrial projects for Colas and indeed innovation and digital transformation in the construction business. And if I may, a few words about what is known as our integrated report. We're publishing this for the first time today. This integrated report is an information communication tool for our partners, telling you about those projects where we propose to create value. We have about 50 pages to include the challenges, the projects, the strategies implemented and of course the results achieved. Now in this document, we believe this is a useful document. We present our societal or social performance, our environmental as well as financial performance. This integrated report completes the other documents about the group and presents our long term vision in a comprehensive way. This will make for a better dialogue with all stakeholders. I urge you to look it up. It's been available on our website since this morning and this definitely, I hope at least will be of interest. Thank you so very much. Having completed this presentation together with my aides, I will be happy to take your questions. This gentleman here, well, one or the other. Morning, Jean Jacques Fujal. I have a question. Number one, regarding those items that have sort of cast a shadow on the performance of the construction business in H1, is this behind us or are we expecting other negative effects? We have in particular Bouygues Energy and Services contracts in The UK and Ireland. And after the strikes, the railway strikes, can you still expect to have some form of compensation for I mean, how does it work if your projects were hampered by strikes? And the third point about TIBCO and the Venezuelan oil, have you found other source of supply, it's bitumen not oil or is it more complicated than that? And then the second question, this time on bitumen in France, in July there was a well, in the trade press, there were reports of shortfalls, shortages rather in certain parts of the country, is everything back in order now or not? Well, regarding contracts with Bouygues Construction, Philippe Bernard will tell you more. These things occasionally happen in the construction business. These contracts sometimes, well, there may be incidents, they're difficult to completely supervise. These are prototypes every time. I think that all the difficulties now have been fully identified and well under control so we're not expecting any untoward developments in the coming months. Regarding the railway strikes, number one, the SNCF, I'll make two comments. Number one, well, the work that we could not complete because of the strikes will need to be completed. So basically, we've postponed completion and they are still in our portfolio. And as you may know, there was a dramatic event in Italy, the collapsing of a bridge, the collapse of a bridge. And well needless to say, operators or owners of bridges will need to take steps to ensure that of course such tragic events should not happen again and should ensure the safety of these bridges. Now strikes, railway strikes are temporary events. We'll have to catch up for lost make up for lost time, but the tragedy in Italy will prompt all bridge owners while you have highway operators, you have municipalities, central government or here in France, the French railway services, SNCF will need to take all this on board and take a hard look at the state of repair of all bridges, not just SNED, EDF, the electricity grid as well. But in all, I mean, this business such tragedies, well, I suppose one of the consequences will be that more work will need to be done and that probably will mean more business for us. I don't know if Philippe wants to add anything. Regarding bitumen, we have a bitumen expert and the Head of Colors will tell you more. Is that working? Okay. First of all, we have a long term contract with PBSA, which ships one boat every month. It's complicated as a rule, but more complicated than usual at the start of the year. We do have other solutions but they are less competitive. As for what happened with bitumen, was a twofold effect. First of all, very strong demand because the market is growing And then there's of course the tons of coated bitumen that we were unable to produce in the winter because of the weather. They have to be produced in the summer. So strong demand, sharp interest in demand and at the same time, the railway strikes disrupted traffic. So refineries that had bitumen find themselves unable to ship it out. So the impact on Kolas was limited insofar as we were able to anticipate this. In July, we recorded a record month over the 2,000,000 tons. This is an all time record, 120 equivalent of 120 tons of bitumen that we booked in May and June and stocked in our in our plans for these works. Maybe I should remind you that since the acquisition of Milamacastro, the Colas Group has become a major player in bitumen. In fact, it's probably the biggest buyer of bitumen in the world. This gives us a very particular position because we are buyers but we also have a lot of product to ship and to store. Bitumen is a particular type of product that has to be maintained at a certain temperature, failing which it solidifies. There's a gentleman here then over the other side. Nicolas from HSBC. Let me begin with construction. We're talking about a buoyant environment. How would you characterize the rest of the markets if you characterize nonrecurring effects? It's that reconstruction, the demand for housing has slowed. What are your anticipations for 2019? In telecoms, I see the ARPU or ARPU is slowing by something over 2%. Could you give us further information on the impact of the price increases, the product mix and so on that leads to this financial performance? Okay. Concerning Grand Paris project and the market, Philippe Bedard is the Chairman of Bouygues Construction. As for the market as a whole, my assessment is that the market is experiencing strong momentum, particularly in the Paris region, the Ile De France region, particularly in the offices, there are a lot of projects in the offering. Overall, as you've seen, there's a certain slowdown in housing, residential and social housing. This is largely offset by greater volume of refurbishing. So overall in France, the market is still at a good level when you factor in these various components. The earlier on in the year, there was a pickup in industrial construction particularly with productivity gains in industry, particularly with the installation of more and more robots with assembly lines being optimized. Broadly speaking, the market is, shall we say, positive and buoyant. Maybe Francois Berthier, who is the Chairman of Bouygues Immobilier, say a few words. As regards to housing market, 2017, with over 130,000 dwellings sold, the market peaked. But our feeling is that 2018 should stabilize at about 125,000, which is still well above the twenty year average, which is usually around the average would be around 105,000. The market is slowing because of demand for the P and L housing offer. Now housing permits or applications for housing permits have declined particularly for individual homes, individual houses. Apartments is up but in cities our experience is that cities are increasing, less dense areas have individual homes. This is because I think of various components that were not really affected by them. But the ministry has just published the figures for the first half year and the number of reservations in the first half year was up 0.8%. Our volume figure is minus 0.2%. So we're very much in line with the market and expect to be stable in terms of reservations by comparison Richard Vielle, maybe add a few words to that. As for ARPU, you have to distinguish between mobile of whether average revenue is stable and in fixed, while the trend is fractionally downwards. This is because of first of all, the market is strong, as you can imagine, but over and beyond the strength of the market performance, are a number of promotional drives on the twelve month plans. Upshot is that these twelve month plans have a temporary impact on ARPU, which then stabilizes after that twelve month period. Have one here. Jean Pierre Trevin from Garnier. I'd like to come back to two things that were mentioned about Bouygues Telecom. First of all, in distribution, you mentioned the fact that certain offers would not be distributed in physical points of sale. I'm just wondering when this would come into effect and what the impact would be in terms of volume and value. Particularly if you could say a few words about the contribution of the B and U sales in physical points of sale. You're also rolling this out to the regions, I believe, if say a few words in addition to this in less dense areas. How about high density areas? Do you plan to increase your presence? My second question concerns mobile networks and five gs. What about the sharing contract with SFO in five gs? Will you be sharing the five gs operations or network? How do you plan to organize yourselves with SFO? Maybe Jose would like to say a few words about that. I'm going to begin with your second question concerning the five gs. Obviously, when we signed the shared rollout with SFO, we anticipated that there would be something after four gs. So obviously, yes, we knew there would be a five gs and thereafter if we agree, if we're still in agreement. But when we venture into these areas with our shared networks, we will continue to share our network. The reasons that led us to do this in three gs and four gs are still the same and still valid, the idea being to reduce costs. Now as for competitive distribution or the way we manage our distribution channels, where we put BNU, how we sell BNU, idea is very straightforward. When there's a fierce online battle, we separate our sales channels to ensure that the premium sales are sheltered, protected from these very aggressive online promotions. This is how we protect bases. In the mobile market, bear in mind that there are very aggressive promotional drives but the premium market is the one that is sold through stores, 50% of that volume is in store. We want to protect this premium market to ensure that it's not contaminated, shall we say, or polluted by these very aggressive promotional drives online. When we look at the breakdown by channel, this is something that we don't do. There's no reason to tell you anymore. Sorry. Three questions, please. Firstly, in terms of your leverage, can you comment whether you've got any appetite for further acquisitions in Construction? And also, think you've previously guided on where you expect net debt to end up at the end of the year. And then on the telecom side, two questions. Could you comment a bit on the reception or the impact on churn from your new tariffs that you introduced this quarter? And then finally, also in telecoms, you mentioned that you expect to end up with about 28,000 mobile sites Q3. In Could you maybe comment on what do you think is the sort of longer term run rate for CapEx given you've got pretty clear plans on connecting them with fiber and how many there will be? Will Philippe take that question and Olivier Rousseau will take the others. Concerning external growth and acquisitions, well, our general strategy we've been presenting for several months remains unchanged. The idea is that in construction, we want to strengthen when possible, when opportunities arise. For Colas, that will be mainly through a better coverage of the territory, stronger positions where we are with high levels of activity such as minimum gas fault in bitumen. But the idea with Colas is always to make acquisitions that have coating, quarry storage distribution capacities in addition to the actual works themselves. We don't buy just construction works. We are investing in the industrial side of the business. If opportunities arise, even big opportunities like Mellow, we're quite prepared to look at them. Bouygues Construction, the strategy is, well, if opportunities arise, we will beef up our position in Energy and Services as we did with Alpiq. Again, nothing preventing us from strengthening our position and we will look at all opportunities. Remember that acquisitions mean that we need to know what we're looking for, but also that targets become available. So it depends on the opportunities. As for net debt, well, the guidance is net debt of EUR 4,000,000,000 at the end of the year. That includes EUR 1,800,000,000.0 in external growth for acquisitions that have virtually all been made already in Millenbach asphalt, Ophemina, Alpek and AW Edwards in the case of Bouygues Construction. That's covering your first question. Now the translation is finished. Translation is instantaneous. You can proceed. Okay. This brings me to your other questions. The level of churn caused by our new prices, well, these new plans and offers are for new customers. They do not apply to the existing customer base. So no real impact in terms of churn. These new offers are doing rather well. They did well rather well in Q2. Secondly, the number of sites, 28,000 by, 2023. There's only so much territory to cover in France. We'll be putting sites in a lot of places where they were done before. What will remain to be done after that? Well, this will be in high density areas and of course the increase will be much smaller. Putting an additional 2,000 sites in. We're seriously covering the high density areas already. So this is bordering on what we call the asymptote. So in terms of CapEx guidance, well, for 2019, the guidance is fractionally below the EUR 1,000,000,000 mark. Thank you. Nicolas DeGio from Berenberg. I have two questions, one at group level and one for concerning Bouygues Telecom. Could you give us the upper limit that you would put on your debt? I think your rating has been confirmed by S and P, but what are the limits you're prepared to go to protect your rating and to protect your gain? The second question concerns the buyout of Bouygues Telecom minority shareholders. Could you repeat that? Minority shareholders at Bouygues Telecom. Oh, no. Did they somebody tell you they wanted to sell? Concerning the group's financial structure, we are guided by the rating agencies. The gearing is fine at a low level, but really the asset test is the rating. And this is of course mainly dependent upon EBITDA of debt. And of course, that would depend on the ability of the target to generate EBITDA. So there is no magic figure. There is, however, a magic rating or let's say a rating we intend to remain strong investment grade. So BBB plus is our guiding light. The lower limit, barring something very unexpected or unanticipated prospects, it's BBB plus This is our asset test, shall we say, for all our investments. From Varghani, two questions, one on Colas. I don't think you've mentioned this. Could you give us the figure for the impact of the railway strike on Colas and the impact in Q2? Second question concerns real estate development. Could you tell us about the level of stock, that's hard stock at Bouygues Immobilier? Avelo Bou will answer your question concerning Colas. No, we can't quantify the consequences of the railway strike on our business because it concerns freight, construction, maintenance work that should have been carried out during the strike and that will still have to be carried out. So we can't put a figure on that. Very often with this type of situation, we have compensation or we receive compensation. I'm beginning with you. Well, in real estate development or project development, we only build when the level of presales is very high. But at the June, we had 177 properties unsold, which is equal to three or four days marketing. We always keep it at a very low level. I'm Frederic Boula from Bank of America. First question concerns telecommunications. There was a previous question on ARPU, average revenue per user and the customer base. Very often, get offers from Bouygues Telecom or your colleagues for 20 or 30 gigs between EUR 5 and EUR 10 a month. How well do you think you can defend your premium with the customer base? Isn't there a risk with repricing such as what's happening at SFO at the moment? My second question concerns the structure of the French market. This is for you, Mr. Briggs. Two of your competitors find themselves in financial difficulties or have even greater difficulty than in the past. Do you believe that your financial structure is sustainable? And what catalysts for change have you seen? Let me answer your second question first, then Richard Vielle will answer the previous one. Concerning the market structure, you will agree that I haven't been the locomotive. I haven't insisted for the increase from three to four operators. I felt that this would be a source of problems. It wasn't very difficult to anticipate. We made huge efforts to adapt to the situation. As you know, we suffered a lot. Employees in, Bouygues Telecom and in Wieggen in general were all affected. I think we can be, let's say, satisfied with what we've achieved. We focus our financial resources and reserves. We focus them on investments in Bouygues Telecom in France, period. That cost us, but it was a major strategic orientation, a major strategic decision. We worked on our costs and we restructured our commercial offerings. I believe this has all produced good results, even very good results. Now as for whether the market will continue to be operated by four players, I'm not, clairvoyant. I don't know. In the spring, last spring, I think it's public knowledge that I initiated discussions. So this is a particular moment in time because RCEP has put out a call for tenders to reformat frequencies. During what we call these windows, these calls for tenders, we are obliged to refrain from discussions between operators. So that's going to continue to be the case until early twenty nineteen and between now and then, nothing is going to happen no matter what else. After that, we'll see. I feel that we are in a position that's currently satisfactory and thereafter, well, we'll try to keep an open mind. We'll see. But I can't anticipate the future. As for the first part of your question, Richard Vielen will answer that. Your question and so that all these is there any danger of a collapse in the real estate market? I don't think so because the mobile market, contrary to common wisdom, is highly segmented. Some people want low prices, want independence, don't want to be of any commitment, they're only in some price. There's a whole category of clients who want after sales service, customized service. They want to be able to be back at particular times of day. There's a lot of alchemy here, and it's the good control, this alchemy that keeps our balance. On the one hand, we are increasing value but are reinforcing volume. This is an economic equation that requires further it's a combination of volume in price sensitive segments, in premium segments with the attendant revenue because of the increase in the customer base, too. So it's possible to do all this. It's a little bit of alchemy, but when you look at ARPU, you see that it's stable in ARPU. ARPU is stable in mobile, I should say, which is a good sign in itself. Other questions? No. In that case, ladies and gentlemen, thank you for attending.