Earnings Call: Q1 2018

May 17, 2018

Ladies and gentlemen, welcome to Bouygues First Quarter twenty eighteen Conference Call. I now hand over to Karin Adon, Head of Bouygues Investor Relations. Please go ahead. Good morning, ladies and gentlemen. I would like to remind everyone that you can find on the company website at wwwreig.com the earnings press release, the presentation we will be commenting on during this conference call and Excel five with historical figures for the group and each business and the company's financial statements. Statements made on this call are forward looking statements. Such statements reflect objectives that are based on management's current expectations or estimates and are subject to a number of factors and uncertainties that could cause actual figures to differ materially from those described in the forward looking statements. Before starting our presentation, I would like to share with you on Slide three two items that have an impact on 2018 results compared to 2017. The first item is the change affecting accounting that was announced with full year results. Starting from first January twenty eighteen, we are now reporting under IFRS nine and IFRS 15 methodology. The application of IFRS nine is affecting financial instruments and IFRS 15 revenue recognition. The impact is not material at the group level. As a reminder, for 2017, the change from IFRS 15 had a positive impact of €19,000,000 on the group sales and a negative impact on current EBIT and net result of €14,000,000 and €3,000,000 respectively. Focusing on Q1 twenty seventeen, the IFRS 15 effect was negative, euros 10,000,000 on the group sales, 8,000,000 on current EBIT and €3,000,000 on net result. There was no impact on cash. While the change in accounting is not material at the group level, IFRS 15 impact is material at Bouygues Immobilier and Bouygues Telecom. A restatement of the 2017 quarterly results that are fully comparable with 2018 is available in the Annex of this presentation. The second item is the acquisition by Colas of Miller McAsphalt on February 28. Given its recent acquisition by Colas, Miller McAsphalt's assets and liabilities are not consolidated at thirty one March twenty eighteen. The provisional price of EUR $585,000,000 for 100% of the shares acquired was fully recognized in provisional goodwill. No contributions to the results of acquired activities have been recorded in March 2018. Miller McAsphalt's results will be fully consolidated in Q2 twenty eighteen and will include March. I would now like to turn the call over to Mr. Philippe Marion, Deputy CEO of Bouygues. Thank you, Karine. Good morning to all of you, and thank you for joining us. I would like to welcome everyone to our conference call to discuss Bouygues' first quarter results. With me in the room is Christian Lecock, CFO of Bouygues Telecom. Following my comments, we will be answering your questions. To begin on Slide five, I remind you that like every year, first quarter operating results are not indicative of the group's full year performance. Turning to the key highlights of the quarter. First, Bouygues Telecom continued to display good commercial momentum with its best quarter of FTTH net adds since the launch of its fiber offers and delivered robust earnings growth. Second, the backlog remained at a record level as construction businesses are well positioned in upbeat markets in France and internationally, even though the activity has been affected by adverse weather conditions in Europe. In this context, we can confirm the full year outlook shared with you in February. Turning to key figures on slide six. Sales were stable year on year at €6,800,000,000 including a negative currency impact of €170,000,000 coming mainly from the depreciation of the Hong Kong dollar, the U. S. Dollar and the Australian dollar against the euro. Like for like and at constant exchange rates, sales increased by 2%. Q1 twenty eighteen current operating profit was a loss of €111,000,000 but as every year, first quarter results are not indicative of the full year performance of the group. Both Bouygues Telecom and TF1 increased their profitability in the 2018. In line with 2017, Bouygues Telecom continued to improve EBITDA margin and current operating profit with a year on year increase of 1.6 points and €18,000,000 respectively. At €38,000,000 TF1 current operating profit was up €2,000,000 due to cost control including savings on cost of programs. Current operating margin increased by zero point points to 7.7%. Turning to Construction businesses. As usual, first quarter financial results are not indicative of the full year performance. Beyond Colas' usual seasonality, harsh winter conditions in Europe have penalized the activity of the construction businesses. Colas activity was the most affected in the first quarter and to a lesser extent Bouygues Immobilier and Bouygues Construction. To be more specific, precipitation levels across France were two to three times higher in Q1 twenty eighteen compared to normal levels. And the number of hours not worked due to bad weather has grown by 20% year on year. However, we are confident that the Construction businesses should be able to catch up the first quarter delay in activity before the end of the year. Operating profit included non current income of €55,000,000 in Q1 twenty eighteen, of which €69,000,000 was a capital gain on the sale of sites to CELnex versus non current charges of €17,000,000 in Q1 twenty seventeen. Finally, profit improved by €53,000,000 from a year ago, including Alstom's contribution of €73,000,000 in Q1 twenty eighteen, a €28,000,000 increase over last year's first quarter contribution. Let us now turn to slide seven to review the financial structure of the group. You can see on this slide that the group maintains a strong financial position. Net debt was €3,800,000,000 at end March twenty eighteen compared to €1,900,000,000 at end December twenty seventeen. The increase mainly reflects first, the usual seasonal impact from Colas and second, the acquisition by Colas of 100% of the shares of Miller McAsphalt Group for €585,000,000 Please note that net debt at end March twenty eighteen has yet to include the acquisitions of Ophemina by TF1 and Alpiq Engineering Services by Bouygues Construction and Colas. Regarding Ofemina, TF1 has announced the finalization of the acquisition of the majority equity interest held by Axel Springer, which amounts to 78% of the capital at a price of €39.47 per share for a total of €291,000,000 TF1 will also file a mandatory simplified tender offer for the remaining shares at the same price. We expect net debt of approximately €4,000,000,000 at the group level by end twenty eighteen. I will now turn to the review of operations starting with the Construction businesses. Let's begin with the backlog on slide 10. In the first quarter, we maintained the good momentum of 2017. As a result, the backlog reached a record level of €31,700,000,000 at end March twenty eighteen, up four percent year on year and up 7% at constant exchange rates. Both France and international markets drive this performance. In France, the backlog at end March twenty eighteen is up 5% year on year. You can see on the chart the growth in the backlog of each of the three construction businesses. This is thanks to an upbeat French market, mainly in the Greater Paris area due to the Grand Paris standard. In addition, some big cities in region are extending or upgrading road and rail transport networks due to urbanization. In International Markets, the construction businesses remained strong. International backlog was up 3% year on year and up 10% at constant exchange rates. Some significant contracts have been booked in Q1 twenty eighteen, including the construction of a solar farm in the Southeast Australia for nearly €150,000,000 an innovative modular residential construction project in Singapore worth 90,000,000 and several rail contracts in The UK for a total of EUR 140,000,000, including the extension of the Birmingham Metro. Overall, the share of the order book in international markets for Bouygues Construction and Colas remained unchanged at 57% compared to end March twenty seventeen. Let us now turn to France where we have strong visibility as illustrated on slide 11. Since the beginning of 2017, the French construction market has returned to growth, driven notably by the Grand Paris project that has recently been confirmed by the government. This project gives strong visibility to our three construction businesses with calls for tenders extending from 2017 to 02/1930. As a reminder, the Grand Paris project consists of first Grand Paris Express, the new Metro Of Paris region involving the building of 200 kilometers of automatic metro lines and 68 stations. Second, RER Hill extension to the West of Paris, including the upgrade and the building of 55 kilometers of rail lines and the renovation or construction of 14 stations. And third, property development projects with the objective to build 140 square meters of new neighborhoods around the Grand Paris Express stations. The cost of the transportation infrastructure projects is expected to be around €35,000,000,000 At end Q1, only €8,100,000,000 of projects have been awarded, of which 1,300,000,000 have already been included in Bouygues Construction and Colas backlog. You can easily see that the Grand Paris infrastructure project offers great commercial potential for the coming years. In addition, the objective of Grand Paris to build 70,000 new housing units each year and to renovate and revitalize the district around the stations leads to a positive outlook in property development. At end Q1, 55 property development projects for inventing the Grand Paris metropolitan area have been awarded representing investments of around €9,000,000,000 Relying on Bouygues Construction and Bouygues Immobilier's strong expertise in urban development offers, Bouygues is the most awarded bidder with 11 projects won to date. Those projects will have a long development phase and they have not yet been included in the backlog. The total amount to be spent for the financing of Grand Paris property development is estimated at around €35,000,000,000 And highlighted previously, you can see that with €9,000,000,000 already awarded out of €35,000,000,000 plan, we have good visibility for the years to come. In the short term, the outlook is promising in France for Colas with growth in roadworks and rail supported by the resumption of public funding projects, the Grand Paris projects and the second highway plan with an objective to spend €800,000,000 over three years and probably more as you have heard this morning by the French government. Let us now move to slide 12 to focus on two major urban development projects, one in France in Q1 twenty eighteen, confirming Bouygues' leadership is sustainable mixed use neighborhoods. Bouygues Construction and Bouygues Immobilier have built a strong expertise in designing and developing sustainable districts. With more than 30 eco neighborhoods built or under development in France, Switzerland and The UK. Those projects focus on promoting measurable surroundings, soft mobility, innovative services as well as biodiversity conservation, waste recycling and lower energy consumption. They are addressing the needs of clients and future inhabitants in partnership with big companies and startups. At the beginning of 2018, Bouygues was selected to develop two major sustainable district projects in Paris. First, the Charrington Bercy district in Southern Paris, a massive project we won through the call for bid inventing the Grand Paris metropolitan area. The mixed use program comprises 360,000 square meters of housing, offices, retail, entertainment and public facilities. Several emblematic architectural projects will emerge such as a 180 meter high green tower with suspended gardens. The district will include a new cluster dedicated to tech and video games. The first phases of this urban development are scheduled to start in 2021 and a discussion is underway with residents. This project should generate more than €2,000,000,000 of activity for Bouygues Immobilier. Second, Bouygues will develop the Chapelle International District in Northern Paris, a mixed project on an old railway site that will include certified high environmental quality offices, housing, student residences and a multi sport venue for the Olympic Games and a new campus for the University of Paris Ponte Ensorbond. This project represents works for nearly EUR110 million for Bouygues Construction. Let us now turn to international markets where Bouygues Construction and Colas continue to pursue their expansion in countries where they have a long standing presence. Looking at slide 13. The group has continued to expand in two major countries, Canada and Switzerland, which offer growing markets, good outlook and a low risk profile. First, Colas completed the closing of the acquisition of 100% of the shares of Miller McAfeele Group on February. As a reminder, the Miller McAfeele Group is a major player in road construction with a strong foothold in Ontario and in bitumen distribution in Canada. With annual average revenue of approximately billion and an average operating profit margin of 7%, it employs 3,300 people. The acquisition of Miller McAsphalt will allow Colas to expand its geographic coverage, strengthen its presence in Ontario and significantly increase its bitumen storage and distribution capacities across Canada. This transaction is part of Colas' long term strategy to continue its development in North America. Second, Bouygues Construction and Colas have announced on March the acquisition of Alpiq Engineering and Services, a leading Swiss player in the energy, industrial services and rail infrastructure sectors. Alpiq Engineering and Services employs around 7,600 people and it reported twenty seventeen sales of approximately billion with an adjusted current operating profit of CHF67 million. The sales were generated mainly in Switzerland with 55%, Germany with 24% and Italy with 12%. The closing of the operation is scheduled for the 2018, subject to the approval of the European and Swiss competition authorities. Let us now get a closer look at this acquisition on slide 14. Alpiq Engineering and Services is a major European player in energy and services operating in several activities. First, building technology and design and transmission and distribution are core to Bouygues Construction existing businesses. Alpiq is a leader in Switzerland in those two activities, which cover the whole country through an extensive network of agencies. Its presence also extends to Germany and Italy in building technologies. Second, Alpiq is a European leader in categories for rail and farmways. It is present mainly in Switzerland, Italy and Central Europe. And this activity will reinforce Colas Rail. The third activity, Industrial Engineering in Europe, is a benchmark in Germany with power generating facilities, industrial services and nuclear decommissioning. Those activities will contribute to Bouygues Construction's development strategy in the energy and services sector. During the past twenty years, Alpiq Engineering and Services has built strong and all inclusive technical expertise in its businesses and has the ability to deliver and manage high value added projects. Let us now to Christian Lecocque. Thank you, Philippe. Starting with Slide 16, you can see that we maintain good performance in mobile during the quarter despite heavy promotional activity in the market. We won 453,000 new mobile customers in the 2018, of which 132,000 were new planned customers, excluding MQM. At end March twenty eighteen, Bouygues Telecom served 14,800,000 customers. The four gs offers continue to progress in our customer base. At end March twenty eighteen, we benefited from 8,000,000 active four gs subscribers, which amounts to 72% of our total customer base, including M2M, compared to sixty seven percent one year ago. In addition to this growth, there were continuing increase in usage. Four gs customers average monthly data consumption was between six and seven gigabytes in the 2018 compared to 3.3 gigabytes in the 2017. Moving to slide 17, we see that FTTH has been instrumental in first quarter fixed growth in a market impacted by strong price pressure. FTTH net adds have accelerated in the 2018 as we benefited from the new organization we established in mid-twenty seventeen to enhance our efficiency in local sales and marketing. It was also helped by a boost in a number of premises marketed as we will see in the following slide. Bouygues Telecom won 64,000 new FTTH customers in the 2018, the best quarter since the launch of its fiber offers. The total of FTTH customers was 369,000 at end March twenty eighteen compared to 144 thousand one year ago. Half of our FTTH growth in the first quarter is new customers, which is good news. We expect this positive trend to continue supported by the increase of premises market and the new range of offers we launched on April, focused on Internet access quality and tailored to specific customer needs. For example, BBox Ultimate, our new offer for intensive or demanding users, winning faster, more robust Internet connection includes: first, high speed Internet everywhere in the home, thanks to fiber connection providing up to one gigabyte per second download speed, the latest generation WiFi and for the first time in the market, a WiFi repeater included in the offer. And secondly, a new generation Android four ks TV set top box, including a personal video recorder and a choice of quality content bonuses such as Start by Canal. Overall, the total customer base reached 3,500,000 broadband users at end March twenty eighteen. Slide 18, which you are already familiar with, highlights Bouygues Telecom's FTTH network rollout. As you can see on the chart, the number of marketed premises has accelerated at end March twenty eighteen, reaching 4,700,000 compared to 4,000,000 at end December twenty seventeen. Marketed means that only the final door to the home needs to be done. This increase mainly came from the medium dense area, where we are co investing with Orange by tranches of 5%. In this area, marketed premises have increased by €500,000 over the period. The remaining €200,000 increase came from the various areas to co investment with SFR and in the public initiative network area, where we started marketing our first promises mainly through our agreement with Axione. Bouygues Telecom is now able to market its FTTH offer in 85 out of 96 departments located in Mainland France. The FTTH network rollout and the number of marketed premises will continue to accelerate in 2018 in order to meet our goal to market 12,000,000 premises by end twenty nineteen and twenty million premises by 2022. On slide 19, you see that Bouygues Telecom's total sales were up 5.9% compared to last year. Looking at sales from services, they were up 4.9% year on year. As a reminder, sales from services is one of the two new performance indicator with ABPU that we have put in place following IFRS 16 implementation in order to better analyze revenue evolution. Sales from services notably include sales built to the customer, sales from incoming voice and text, spreading of handset subsidies and sales from services provided to business customers. ABPU means average billing per user and is the result of dividing sales billed to the customer by the average number of customers over the period. If you focus on sales built to the customer, they increased by 5.5% compared to last year. The growth reflects first higher mobile and fixed subscriber basis and second, the positive impact on Q1 twenty eighteen of the end March 2017 price increases on premium mobile offer and all fixed offers. Please note that you can find a definition of the sales from services and of the sales billed to the customer in the grocery at the end of this presentation. Furthermore, the restatement of the 2017 quarterly sales from services is available in the historical data file published on our website to be fully comparable with 2018. Continuing the 2017 trend, Bouygues Telecom posted robust earnings growth in the 2018 as shown on Slide 20. EBITDA for the 2018 was €247,000,000 an increase of €28,000,000 over the 2017. Moreover, EBITDA margin on sales from services was up 1.60.2230.9%. Current operating profit was by 56% compared to the 2017, reaching €50,000,000 Operating profit at €111,000,000 includes €69,000,000 related to the capital gain on the sale of three thirty one sites to Cellnex in the 2018. This amount of €69,000,000 is unusually high for the quarter due to the delay in transfer of sites from 2017 to 2018. We are still expecting about €190,000,000 of capital gain in 2018. Gross CapEx of €329,000,000 in the first quarter is in line with expectations for 2018. Thank you, Christian. I would like to briefly comment on the financial statements. We have already looked at sales and current operating profit on Slide six. I will only review the line other operating income and expenses on slide 22. In the 2018, we recorded non current income of EUR55 million, mainly related to the capital gain on the sale of sites at Bouygues Telecom. It also reflects non current charges associated with the network sharing at Bouygues Telecom and the new end PPA impacts at TF1. Turning to Slide 23, the positive change in the associates and joint venture line is explained by Alstom's net contribution. As announced, its contribution was €73,000,000 in the 2018 versus €45,000,000 in the same period of last year. This €28,000,000 increase has been partially offset by a decline in Colas associates as the contribution of its Asian subsidiary Typco Asphalt was lower in Q1 twenty eighteen compared to Q1 twenty seventeen. On slide 24, net debt was €3,800,000,000 at end March twenty eighteen, up by €1,900,000,000 compared to end December twenty seventeen. The increase over year end is mainly explained by the traditional seasonality at Colas and an outflow of €627,000,000 in acquisition and disposals coming mainly from the acquisition of 100% of the shares of Miller McAsphalt Group by Colas. You can also see that change in operations have notably improved in the 2018 compared to the 2017. Turning to the breakdown of operations on slide '25, you can observe that net cash flow decreased very slightly by €14,000,000 year on year. This decrease was offset by a €21,000,000 decline in net CapEx due to Bouygues Telecom and TF1. As a reminder, the transfer of sites to Cellnex did not start until the 2017. And last, working capital requirement decreased by roughly €300,000,000 year on year due mainly to the improvement in trade receivables and advanced held down payments balance sheet items at Colas. We remind you that for the full year, we expect a deterioration in working capital requirement of about €350,000,000 at the group level. Finally, we will turn our attention to the outlook for the full year. As you can read on the slide 27 and as stated at the beginning of this call, we confirm the outlook shared with you in February. This concludes my presentation. Operator, please open the floor for questions. First question, Sam Dillon, Exane BNP Paribas. Please go ahead. Hi, guys. Two questions, if I may. A lot has been made of the increase in the competitive environment in France over 1Q, and that's kind of rung through in some of your competitor numbers. Could you comment on the sustainability of those price initiatives from your competitors? And how you think about reacting if you see a continued slowdown in your net adds? And secondly, I believe you mentioned that half of your FTTH subscribers are new subscribers run from competitors. Could you give an idea of where you're winning those subs from? Thank you. Okay. So about your first question, it's about the SFR strategy during the Q1. Well, it seems it's clear that SFR are focused on the volume strategy, than value oriented growth. I think that you saw that this morning in the results. For Bouygues Telecom, first, we think that the relevant indicator remains the growth of sales and not the volume, I would say, the first point. Second point about the impact of SFR strategy on our own figures. In the fixed, I remind you that we already had a low price offer and so we are not impacted by SFR aggressive offer. And on T Mobile, the market was already very competitive before SFR new strategy with many flash new files. So for us, no big impact coming from SFR on your new strategy. So your first question. Your second was about the split of our FTTH net adds. We said that half of FTTH net adds is coming from migrations, so from our own clients. And the second part is new clients, which is Yes, good news for yes. I think second question was just on those new clients who you tend to win your new FTTH clients from? Or is it just across all three? They are coming from all operators. Okay. Specific. Cheers, guys. Second question, Daniel Morris, please. Please go ahead. Good morning. Thanks for taking the questions. I have two as well, please. The first was just a follow-up on the fixed KPI dynamic. Can you give us a little bit more color about what's driving the continued slowdown in the fixed KPIs? Is this more to do with churn on your obviously ever growing base? Or is it more about changes on acquisition share? The second question is a little bit more technical. Slide 18, you show some helpful detail on your fiber strategy. I just wondered, can you update us on what the economics for the very dense area is going to look like for you once you get to that 4,500,000 homes market at the end twenty nineteen? If I understand correctly, by the 2019, I think you'll still only have about 1,500,000 homes through the SFR JV and the rest in negotiation on different basis. So can you let us know what the economics will look like for the non JV homes? Thanks. So your first question is about fixed dynamic. I don't think that the dynamic is worth in the past. We are very happy with our figures in the Q1, especially due to the fact that we don't we didn't use many heavy promotion and flash sale during Q1. So our performance is very good in Q1 when you take that into account. About your first question is in the Vaidencera, we have two different agreements. One is with two different, I would say, rollout. One is clearly with SFR around two third of the area. And the other part, we are rolling our own network. I would say the financial KPI are quite the same as the during SFR agreement SFR the rollout with SFR is an old rollout And at this time, the price to rollout fiber was higher than what it is today. So the return on investment is quite the same. Thank you. Next question, Josh Hallett, Berenberg. Hi, thanks for taking my question. I basically wanted to ask you about why you think you've managed to do better than Iliad has in this quarter. And then I wanted to know what your feelings are about Iliad's plan to change its marketing sales strategy, its management team in France. Do you think that's a positive thing for the market or a negative thing? Thank you. No. We are not in a position to comment the strategy and the position of our competition. It's your job and not our work. The fact is that definitely our strategy for the time being deliver better results than some of our competitors. That's the only comment we can say. So clearly, our assumption and the items of our strategy up to now delivers better results. That's the only comment. After that, discuss with Iliad to understand what is its strategy, the future strategy and how the result is like that. Okay. Thank you. Next question, Nicolas Didio. Nicolas Didio from Berenberg. I have two questions. First is regarding the 2018 guidance regarding the improvement of margin for the construction activities. I just wanted to know, I mean, how much of the 2018 target is relying on non repeat of the Q1 weather conditions? Do you have enough buffer on your business and in terms of provisions and cost savings to absorb a very poor Q3? Or would it lead to, I mean, the margin to be flat or slightly down? And the second question is regarding Smart Cities. I think the deal with Dijon is supposed to deliver, let's say, the whole service at the 2018. Are you on track on this? And what's the development on that kind of business for the rest of France? Thank you. Yes. Obviously, if we have rain from now up to December, definitely, we will not be in a position to deliver our guidance for sure. But today, there is no reason to think about this type of condition. So obviously, if we have a very adverse climate condition during the summer and in Q3, we will have to change our guidance. Definitely, Colas is more or less dependent on weather condition. So we have no sufficient buffer. And for Colas, it's difficult to have a buffer because you are able to work or not. That's all. So our assumption is based on the fact that we will be in a normal or more normal condition in term of weather conditions for sure. Regarding Dijon, I don't think that the schedule is to be ready to have all the facilities and all the services in place end of this year. It's more for the years to come. So today, we are totally on the schedule and the planning. There is absolutely no fear on the delivery of this project. And definitely, we consider that, obviously, there is a trend to have other type of contract like that in the future. And definitely, we consider that part of our growth in construction businesses will be based on the fact that other cities will develop this type of smart city scheme. So we agree, it's part of the good trend of the market in construction in France, but also in other type of in other countries. Thank you. Can I just add one little question on Alpiq? Kind of synergies can we expect from this acquisition? I mean, now, if I just do the simple math, it's 3.9% margin. Can we expect the margin to go up or just the revenue side In could fact, there is no reason to have a lot of cost synergies or synergies. It's more an addition of new territory for us, reinforcement in Switzerland and development in Germany for Bouygues Construction and for Colas in Catenaries, Switzerland, Italy and Central Europe. So definitely, it's more an addition of new markets for us than a case in term of cost synergy because there is no reason to have a lot of cost synergy cost. So it's definitely an addition in addition more than synergy story. Pretty clear. Thank you. Next question, Stephane Beyazian, Redburn. Thank you. Just one question left for me, which is you have a very nice segmentation of boxes at Bouygues Telecom in the market. And I was just wondering whether we can better understand your customer inflow between the different boxes. I guess my question and my bottom line is, to what extent a significant part of your customer inflow is coming to the B Box seats, which is the sort of low end product in the market because we have a couple of factors such as the competition in the low end market, also the growing success of Apple TV and Connected Television, etcetera. So I was wondering whether there is a sort of trend of unbundling the TV from the bundles in the market and possibly more and more customers coming to low end products in the market. Any color on that would be great. Thank you. Okay. So first, we just launched this offer a few weeks ago, so it's too early to comment about the commercial results. Your second point was the possibility for the client to not take the 3P offer and to prefer to have an ePal TV or something like that. Today, it's not really the case. Our 2P offer, it's not our main inflow in term of customers and it's more a way to attract customers and then to migrate them in the shops to a 3P offer. Okay. Thank you. Next question is from line of Jose Collison, HSBC. Yes. Thank you. First question is on Miller McAsphalt. It has been three months that you acquired the assets. So if you can tell us more about the revenue and EBITDA sorry, EBIT contribution for 2018. Should we replicate the kind of historical trends? Or should we expect a different profile maybe driven by some synergies? And regarding telecoms, if you can provide us with the split of your FTTH customers between the very dense area and the rest? And maybe share with us your view on your fiber CapEx budget for the current year? Thank you. Regarding Miller McAsphalt, so we run the company since the April 1. So for 2018, definitely the good assumption is to repeat the past with no big impact in term of synergy. That's the first element of my answer. The second one is as for Alpiq, the most important point for the Miller Motte Gasphalt acquisition is definitely to add new territory in Canada and a better position in term of bitumen distribution, In term of synergy and cost synergy, the result will not very material because there is no reason to have a lot of synergy, but a lot of growth for Colas because of these new territories and a better position in term of bitumen distribution. Okay. So regarding telecom, your first question was about the split of our customer base between very dense, medium dense and the public initiative network that we had. We don't give the split. Just keep in mind that as the occupancy rate is higher for the I would say the marketed premises, the old marketing premises, of course, we have today more subscribers in the regions area than in the medium dense. The momentum is very good in the medium dense area. And your second question was about CapEx in the fiber. We are spending around EUR 200,000,000 per year in network and this is mainly for FTTH. Thank you. May I ask just a very short question? Philippe, you mentioned or you confirm that the net debt target for the end of the year is at EUR 4,000,000,000. Does it mean that you are not expecting anything from Alstom selling the joint ventures to GE? No, because the consequences of the for us and for all Alstom shareholders, the consequences of the exercise of the option on energy JV for Alstom will be in the second dividend during the merger between Siemens and Alstom. So we will see the financial consequences of this fact after or at the time of the merger. See. Okay. Thank you Through very dividend distribution. Perfect. Thank you. Next question, Jacob Bluestone, Credit Suisse. Hi, good morning. I've got two questions as well. Firstly, just on the acquisition of Alpiq. I think this is sort of your first move into Germany, which I guess Europe's largest market. Is this I mean, could we see you sort of starting to scale up in that market? And if so, could you maybe talk a little bit about how you see that from a competitive point of view, given you're sort of coming in, I guess, as a new entrant essentially? And then secondly, on telecoms, is it possible to have a service revenue growth rate for mobile? I think you reported for fixed and mobile combined when you report an app approved for mobile, but I think it's twelve months rolling. So just be interested in what was service revenue growth in mobile for Q1? Thank you. So regarding Alpiq in Germany, so definitely, today Bouygues Construction is not involved in Germany, neither in construction nor in Energy and Services. So definitely, for us, it's an opportunity through the acquisition of Alpiq to enter into this market. It's the first step. So before to scale up and to develop massively our German footprint, we will manage on the first time Alpiq in Germany and after we will see. So it's a first move. The idea is first to manage properly this first move. After that, we will see. But definitely Germany is a very good market, dynamic one, low risk profile. So very interesting in the basket of our favorite type of countries. Again, it's the first move. We have to understand very well the country, the way to work in this country before to start a buildup. So about your question about the split of service revenues, you will find all the information in the annex with all the figures for also for the year for last year. For Q1 twenty eighteen, the mobile service revenue is €719,000,000 and the fixed service revenues is €312,000,000 Great. Thank you very much. You're welcome. Next question Jerry Good morning. It's Jerry Dellis from Jefferies here. I have two questions, please. Firstly, on telecom revenue trends once again. You mentioned that 2018 benefited to a degree from the May 2017 price increases. I suppose from the second quarter, those price increases begin to lap out of the year on year comps. So how confident are you that the latest round of price increases will be able to sustain telecom service revenue growth at the current levels? Or should we envisage some form of slowdown into the And second then secondly, you have 2019 guidance of telecom free cash flow at least €300,000,000 before working capital movements. That would appear to rely on a fairly sizable reduction in your CapEx spending between now and 2019. I just wondered if you could walk us through the building blocks of lower telecom CapEx going into the 2019 year. And it would be particularly useful if you could clarify the level of receipts from Cellnex that you're assuming within that 2019 free cash flow guidance. Thank you. So your first question was? Yes, about our revenue increase for this year. Our guidance we set up at the beginning of this year is to have service revenue increase more than 3% compared to last year. So as you saw that we have 4.9% in Q1, it is higher than 3%. And so of course, it could be at a lower level for the next quarter due to the fact you said that you will have not at the end of this year, you have a comparison impact year on year, quarter by quarter. About your free cash flow, so we maintain our target to reach €300,000,000 free cash flow in 2019 due to four factors. First, we will continue to increase our mobile and fixed customer basis. Second, we will continue to optimize our gross margin and mainly by migrating clients from DSL to FTTH to offset DSL monthly fees. Second point third point, sorry, we will continue to stabilize our cost. And third and fourth, as you said, we will decrease our CapEx after 2018 due to the fact that it will be the end of the rollout of our network shared with SFR. Your one part of your question is, will we have some proceeds coming from CELNAX in 2019? Could be we could have some, but not at the same level than this year or last year because I would say also the transfer of sites mainly took place last year and will take place this year. We have a small remaining part in 2019, but it will be very small. So in other words, we don't reach the EUR 300,000,000 because of the massive disposal to Cellnex. Thank you. Very clear. Next question, Eric Lemarie, Brand Garnier. Yes. Thank you. I've got three questions, please. So first one regarding Colas performance in Q1. Should we assume maintenance cost has been particularly strong in Q1? And if this is the case, should we expect on contrary much less maintenance costs in Q2 and maybe a rebound on margins? This is my first question. My second question on Bouygues Immobilier. So reservation are down 15% in value in Q1 for the Property Development business. Should we expect a decline of reservation on a full year basis or on Cothraea gradual catch up in the next quarter? And the last question on Colas actually. Could you remind us what is the risk of a stronger oil price on Colas input cost through the bitumen price? Thank you. So regarding Colas, in fact, main reason of the lower result compared to one year ago is definitely adverse weather conditions. The main consequence of these conditions was the fact that we were not able to handle mainly high end pavement activity, so activity with bitumen and asphalt, which are with the higher margin in the business. So rain and freeze and so on, the consequence of that was the fact that low level of activity plus activity with lower level of margin than the regular and normal activity. It's the main explanation. The explanation is not really maintenance or very specific activity. So that's the first element. Regarding on Colas, third question was Regarding about the price. Price oil price and bitumen, yes. In fact, the real consequence of an increase in the bitumen price is the fact that the volume of activity can be reduced. Because in fact, a local authority has a budget in euro or in dollar or in certain currency. And in fact, if there is an increase in term of bitumen, the price of the works are increasing. And so they order less job because they have a certain amount of euro to spend and not a quantity of bitumen to order. So in fact, there is no impact in term of risk, in term of price, margin and so on. The only consequence is less volume. Regarding the second question? Yes, it was reasonable. Reservation of Bouygues Immobilier. No, yes. We remain with a stable or slight decrease reservation level in 2018. This first quarter was a little bit special for Bouygues Immobilier. First, we have a very low level of reservation in block, so for social investors and social offices. But for the year, we remain with a good level, but probably more in the third and fourth quarter of the year. And we have a negative comparison effect on the private investors, because in the 2017, it was before the presidential election. And we had a lot of people using the P and L scheme, which was not the case in 2018. And we consider that this situation will be not the same for the full year in 2020 for the full year. So definitely, we consider that stabilization or slight decrease compared to 2017 will be the assumption for the full year. Thank you. Very clear. Thank you. Next question, Frederic Boulan, Bank of America. Hi, good morning, everyone. A couple of follow ups. Firstly, you flagged the opportunity for around the Grand Paris. If you can help us a little bit in terms of your ambitions, both on the transport layer and the real estate side in the next few years and how this could support your back book? Second question around telecoms, you seem comfortable with your level of broadband additions in Q1. I sense a bit of a change in focus towards value as we've seen with your new April offers. I mean, is this the right understanding of how your thinking is evolving towards a target before very much focused on this €4,000,000 subs target? And then a follow-up on the free cash flow question on telecom, if you can expand that logic at the group level for next year, in particular around free cash flow in the activities in the construction activities and also working cap at the group level, just to see what's going to drive you towards your group free cash flow ambitions next year? Thank you. So I will answer your first question about our broadband net adds for the Q1. Well, we continue to have a target to reach 4,000,000 subscribers as soon as possible. So we'll continue our volume strategy in the Q1 in the future, but we don't want to do I would say that anything to do that. We are very cautious and we want to continue to increase the quality of our service and of course to our value also. The main focus is still volume. So regarding our ambition on the Grand Paris, in fact, our ambition is to use all the Grand Paris projects either in infrastructure side or in the property development side, use that to improve our profitability and the result of the construction. So in fact, our target is definitely not to have market share or to reach a level of activity, but to use this great opportunity to take benefit from this opportunity to increase margin and profitability. It is the reason why we remain and we will remain very selective in all these projects. And again, the target for us is not volume, but definitely result. But you have seen that for the beginning, have taken our relative fair share in term of infrastructure, and we have won 11 out of 55 projects development property development projects. So for us, Grand Paris will be in the future very visible in our activity, but again, driven mainly by result effect and not volume effect. Regarding free cash flow, you know that we don't give free cash flow targets for the group. But as you have the final net debt, you have the variation of the working cap, you have the level of our CapEx, I think that you are able to calculate yourself the level of free cash flow we are targeting. Maybe just a follow-up on that last point. So think you have a so implicitly, you have an increase in net debt before M and A. So you have I think a cash flow of around €300,000,000 for this year hit by this working cap. My question was more next year whilst when you have telecom And next year 2019 you mean? When you have telecom improving, do you also expect construction to improve as well? And how do you think about your medium term ambition, I think, So to go back to €1,000,000,000 definitely, move in our free cash flow is an increase year after year in the coming two, three years for sure. It's first is the target, but it will be also the result of the positioning we have in all of our businesses. So definitely, the trend is an increase in term of free cash flow in the coming years. Thank you very much. Next question, Thomas Kudry, Brand Garnier. Yeah. Thank you for taking my question. One very quick question, please, on telecom is on the mobile ARPU. Can you please it's been rather stabilizing these past quarters. Can you give us some insights on underlying dynamics? Is there still a significant impact from lower incoming revenues from SMS and voice? And also, can you tell us how your mix, your acquisition mix is evolving between low end and high end and how you expect it to move looking forward? Thank you. So first, remind that we are now reporting about APU, so average built car user, not anymore in terms of ARPU. So incoming of new is not including in the ABPU. So you don't have you will not have this impact for the next this quarter and for the next quarter in the figures we are grateful. About the evolution of the ARPU, yes, still have the same phenomenon as the last quarter. So first, impact of promotions in the low end part of the market. Second, a mix effect with more low end subscribers. And third, increase in prices and in term in ABPU for the high end customers. Okay. Thank you. Next question, Jonathan Dan. Hi, Thank you for taking the question. There's two. One, with the build to suit towers you've awarded to Cellnex, does that include already plans for any five gs expansion? Or do you think you would sort of need more sites for five gs? And then second, it's a clarification on the 4,700,000 fiber plugs. Could you just confirm, if you were to if of that 4,700,000, I guess that's sort of that's a coverage area. How many of those how many customers could you connect of that 4.7%? So I guess there's how many 5%? So about your last question, we have many ways to connect customers. First, we can buy tranches of 5%. And today, we are buying tranches one tranche at 5% to one punch, but we can also went the vertical part of the fiber to connect the customers and indicate we don't have to buy the tranches. So we can on one way, we can buy or we can wait depending on our market share in each Your first question is about the build to suit. Well, we will see if we need more sites, right? We are deploying more sites with for five gs. So we said, I think it was one year ago that we are adding 2,000 more sites in the Vedanta area to cope with five gs needs. Part of them will be done by B2C and we have also in the agreement with CEMEX the possibility to add some antennas, some five gs antennas on our site without paying more fees to CEMEX. Okay. Can I ask a Miller McAsphalt question? The in the first quarter, is the first quarter loss making from an EBIT perspective, so that in 2019, we'll sort of bolt on an extra loss making quarter to arrive at the full year impact for 2019? Yes. Miller and McAsphalt has exactly the same seasonality as the Colas business. So it's not a business with four equal quarters. So definitely, we will increase the seasonality of the Colas Group because of the acquisition of Miller McAsphalt. Thank you very much. We have no more questions in the line. No questions on the phone. Okay. So thank you for joining us today. We will be announcing first half twenty eighteen sales and earnings on August 30. Should you have any question, please contact our Investor Relations team. Thank you very much, and have a good day. Bye. Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.