Bouygues EN
Q4 2012 Earnings Call Transcript
Transcript Call Date 02/27/2013

Martin Bouygues - Chairman and CEO: Good morning, ladies and gentlemen. Thank you for being here this morning. I'd like to start my presentation if I may. First of all, let's have a look at the highlights and key figures for Bouygues in 2012. As you know, the financial results of Group Bouygues in 2012 clearly reflect the substantial upheaval in the mobile telecommunications market in France and reflect to a tougher economic situation. Yet in spite of all that, this Group has maintained its robust fundamentals.

I think the most important of these fundamentals is our tremendous commercial flexibility. We've seen a very strong forward-going momentum in the construction business that I'll come back to in a few moments time. TF1 has managed to both to cut its costs and improve its audience ratings, both substantially, and the beginning of 2013 is, I'm happy to say, a continuation of that very favorable trend. We've also stabilized our mobile subscriber base in Bouygues Telecom and seen substantial growth in our fixed subscriber base, which was very important for us.

We've maintained a very sound balance sheet with a very healthy level of free cash flow and a tight control of our net debt. We managed to do all that while implementing very considerable adaptation plans. Our business areas have been highly responsive in adapting to the new situation. Bouygues Immobilier has taken the necessary measures to withstand the considerable downturn in the residential property market in France.

Colas has launched a new organization for its road making activities in France. TF1 has implemented the Phase II of its optimization plan and finally Bouygues Telecom has carried out all the transformational measures that we announced very early in 2012 and which have been implemented gradually throughout 2012 in accordance with our announcements and all those measures are now implemented.

The sales of the Group in 2012 up by 3%, EUR33.547 billion. Our current operating profit is down by 29% at EUR1.286 billion as against EUR1.819 billion last year. Operating profit which is significantly down by 40%, EUR1.120 billion and net profit attributable to the Group which is down to EUR633 million, clearly the net profit has gone down in a similar proportion to the operating profit. The sales are higher than our initial objective which was EUR32.35 billion and this has been driven mainly by the construction businesses. Of course, the current operating profit has been significantly impacted by the lower profitability of Bouygues Telecom.

Operating profit includes EUR200 million of non-current charges, which are related to the adaptation plans of Bouygues Telecom and TF1 and EUR34 million of capital gains on asset disposals at Bouygues Telecom.

In this very difficult situation, I thought you'd like to see how the operating profit has changed from 2011 to 2012 business by business. With Bouygues Construction, we've had an operating profit up by EUR11 million, that's due to the proper execution of ongoing contracts. Bouygues Immobilier has seen its operating profit fall by EUR22 million and here we've had to implement on a number of adjustment measures and abandoned a number of programs.

Colas has seen fall of EUR60 million in its current operating profit. This is due to losses related on the sales of refined oil products and lower profitability in the U.S. I will come back to that in a few moments time.

TF1 down by EUR25 million, that of course is due to the decline in advertising revenue in sluggish market. Bouygues Telecom and that's where we've seen most of the fall, a fall of EUR439 million, which is due to a drop in EBITDA and an increase on amortization and provision expenses, so that gives us an operating profit in 2012 of EUR1.286 billion.

Here you have the Group's free cash flow. Apart from exceptional items in Bouygues Telecom down by EUR297 million, EUR724 million down from EUR862 million. Construction businesses has made a positive contribution as you will see the free cash flow is up by EUR270 million to EUR812 million which is a good performance, TFI has also contributed to that improvement by EUR11 million and you can see that the big fall is Bouygues Telecom because we had a positive free cash flow of EUR208 million in 2011 and the cash flow is negative to the tune of EUR89 million in 2012. So that's a turnaround of EUR300 million for 2012 alone.

The Group financial position; shareholders' equity is over EUR10 billion. That's an improvement of EUR400 million. The net debt is up by only EUR310 million, EUR4,172 million. We have, as I said, managed very tightly our net debt in spite of the purchase of 4G frequencies in 2012 to the tune of EUR726 million, and therefore our financial policy has been determine the carried out in 2012 and that has enabled us to optimize our working capital requirements to make a number of targeted asset disposals. In spite of everything, we have managed to make a number of acquisitions, both with Bouygues Construction and with Colas or even in Bouygues Telecom. Bouygues Telecom, as you know, acquired Darty Telecom during 2012.

The Bouygues Board wants to propose to the AGM an unchanged dividend of EUR1.60 for 2012. Clearly, the message here is a message of confidence. In the future of the Bouygues Group, that level of dividend of course, means that the dividend yield is really quite significant.

Let me move on now to a presentation of the businesses. Starting with Bouygues Construction, as you know, sales was buoyant, order book is up 12% at EUR17.1 billion and order intake up 9% at EUR12 billion. Sales up 9% to EUR10.6 billion, current operating profit is up 3% to EUR364 million, current operating margin about stable at 3.4% and net profit attributable to the Group up 18% to EUR267 million.

Orders intake were significant, as many as 15 contracts worth more than EUR100 million, nine of which internationally and three contracts were worth more than EUR300 million. We had very good visibility on our future business activities. We have EUR8.5 billion booked for 2013, so there's very little uncertainty as to the forecast. The order past one year is 16%. This is a very positive criterion in assessing Bouygues Construction, because of course if you have such a deep order booking going years two, three, and four past the current year, this is very positive.

We have a very strong international presence, 47% of our sales in 2012 were internationally, 45% of the order book and half that international order book is in emerging economies and the revenue growth and the robust operating margins, thanks to the smooth execution of our contracts means that this was an outstanding year of assessing Bouygues Construction.

Bouygues Immobilier is facing a more challenging market. You know that this was a halfway between the end of the Scellier tax incentive scheme and the deferral system and half way through the two systems we have, of course, lower business, the reservations for housing and it's down 30% compared to 2011. This reflects the strong decline in the residential property market increased order book for the commercial property business, almost 92% compared to 2011 demonstrates our expertise especially in the green property business. It's to not just Bouygues Construction by the way, Bouygues Immobilier as well now has developed a true know-how in this industry.

We have our order book down – well, sales down to 3% to EUR2.4 billion. Current operating profit down 11% at EUR179 million. The current operating margin is down 0.7 percentage points to 7.5% and the net profit attributable to the Group down 11% at EUR107 million.

Regarding Colas, the big order book is growing both in France, in Mainland France and internationally. Colas has always been very presence internationally. Now it accounts for 44% of its business in 2012. Sales growth reflects our own sound business activity but also the inflation in road production costs and the increase in the price of refined oil products.

Current operating profit was down EUR60 million compared with 2011 and this is due to two factors which I will develop in a minute.

Regarding Colas' operating profit why EUR60 million less, when there is expected losses on the sale of refined oil products, the higher price of the reduced crude oil, which is what we use in this refinery to manufacture our road covering materials. This increased price, this cost was not entirely passed on to the customers. We were able to do this for roads, for (bitumen), but we were not able to do this on basic oils and/or indeed on other products that come out of the refinery, because of the economic crisis. So as a result, this brought it out and a rather significant drop in our in that business profitability.

In U.S. there was a significant loss in the Company that we had acquired recently and that added to the consequences of the delay in implementing the U.S. highway bill as you may know this is a major contract between the federal government and various states and local authorities to refurbish or redevelop the American Highway Network.

So there was a delay there now the plan is being rolled out, but in 2012 there was a delay and that was – that caused a loss, but in any case we were able to reach breakeven in Central Europe that was a good development and good performance of the road building activity in France and we were able to make up for the delays incurred in the first half of the year and we were able to stabilize the operating margin over the year.

Now, Colas has been rolling out an action plan mostly in the U.S. So we stopped the business, the lossmaking business and we conducted targeted cost cutting operations. We're expecting $30 million in savings in 2013. A number of measures were made to enhance the sale of refined oil products. The way to do this was a, to work on diversification and get a better price for our supplies and also there were number of technical measures to do with the refining operations so as to contain our production costs.

So as to prepare for the future, Colas has rolled out a new organization for its road-building business in Mainland France and indeed this is we now implemented as of the beginning of this year and slowly but surely we certainly expect to make up for a possible decline in the French road markets in 2014.

In view of all this, we have to recognize that the construction business has been highly satisfactory. The order book is enjoying significant growth because in spite of the crisis we were able to have our orders move from EUR2.6 billion in 2010 to EUR26.8 billion in 2012 in a matter of two years. This reflects, of course, our good competitiveness in the construction industry. The great sales performances are to do with our ability to offer innovative, high-value added solutions. This also has to do with our sustained international presence in many countries around the globe with a sales network that sometimes merges with that of Alstom and so that means there is a significant flow of commercial information flowing back and forth bridging us and our sales. Of course, there is a new business we are developing, the so-called specialty businesses, which are, of course, growth engines in themselves.

We certainly intend to improve our ability to offer innovative high-value added solutions. The way to do this – we had a few examples. Here you have a rail tunnel in Australia. That project is taking place in very restrictive conditions. We already built one in Sidney a rail link connecting the city to the airport and this is another project in the same kind. We have the MahaNakhon tower in Thailand, a rather surprising architecture, almost cartoon comic shape architecture. This is a very high tower. It's 314 meters, 77 storeys high. Sporting facilities in Canada, this we're able to pull off because of our expertise in sustainable construction. We were able come up with very innovative solutions. The renovation of The Ritz Hotel in Paris and this is, of course, a showcase for the luxury hotel business where we have acquired a strong expertise.

We've been upgrading roads in the center of London. We have a major contract. But as you know in Britain, there are number of cities where we have that kind of partnership that's the sort of thing where Colas is highly effective. The Green Office, Bouygues Immobilier's Green Office in Rueil-Malmaison, this is a positive energy building that we are renting out to Unilever and this is again an example of our knowhow in sustainable development.

I would like to take a short video break to show you a video on the bridge we're building between Zhuhai and Macao in China, this is one of the longest bridges in the world and I think you might find it interesting. Here is a little animation film.

(Video)

As you can see, it looks simple enough, it looks like a little lego game, but it's a bit more complicated than that. It is a highly emblematic project, we'll be very proud when that bridge is build and it's a major technological achievement.

On this slide, we have a reminder of our international presence, we have a few contracts on the slide and that is of course part of our strength in these challenging times in Europe. We are delighted to have outlets outside Europe in countries which somehow have been left unscaved by the crisis.

Regarding our specialty businesses the example of Colas Rail, this has been a very good year for Colas Rail. The business was up 10%, sales were up 10%. Diversified activities, where we have railway maintenance, but also tramways, there are many tramway projects around the world, not just here in France, we have an order book showing growth and with increasing maturity, this is of course will ensure some sustainability. We have the Nimes-Montpellier high-speed rail bypass. We are building a large metro in Algiers, so rather extending it or rapid rail network between Tunis and the outskirts and this as you can see that the order book has almost increased threefold between 2010 and 2012.

So next, Colas TF1 has had a remarkable year, both in terms of cost cutting. The cost-savings spend introduced by Nonce Paolini was highly successful, while at the same times the ratings were up. We were able to gain ratings both in the entertainment and in news, news programs and the performance are remarkably indeed and this is delightful because of course this was quite a challenge, the high ratings at the beginning of the year are very encouraging indeed and this confirms that the strategy is the right one.

Now HD1, the new free-to-air channel is a – has strengthened, the offer we have a strategic partnership with Discovery Communications. We are revisiting our economic plan, they are 85 – I beg your pardon, EUR285 million saved by the end – no, I beg your pardon, EUR85 million saved by end 2014, Unfortunately advertising revenue is expected to come down in spite of better performances in other businesses. We have not much handle on advertising, but I won't dwell on the figures for TF1 because Nonce Paolini and his aides have given you the full details of TF1.

Regarding the French mobile phone, now this has been – this is (known in) major upheaval in 2012. There is a new business developing known as SoWo, SimOnly/WebOnly. This accounts for that 10% of the total mobile subscriber base at end 2012 and the benchmark price is only EUR20 with near-unlimited plans for voice, data and SMS. The voice/SMS plans have got very low entry-level prices and this is something challenging.

The new entrant Free Mobile has been able to take 7% of the French market in terms of volume. We have, of course, because of the full in communication prices with services, this has undermined our position and plus, well, the fact that they are more switching – now more and more customers switching to the cheaper plans, this has affected all operators in their profitability (dump).

I told you we would have an action plan to address this situation. The first objective was to remain the most innovative player on the market whilst repositioning and simplifying our offers. We did just that. We've simplified our plans. We've repositioned B&YOU. With Eden we have – we used to have 14 offers around, we have six. The prepaid cards are now unlimited in time and they are much more affordable and this B&YOU offer which we introduced at the end of last year, last quarter of last year, has it's plan at EUR9.99 which is highly successful.

We've also decided to pursue the fixed broadband business and in this respect 2012 was an outstanding year. We were able to reposition our basic product, the Bbox, with a new version known as Bbox Sensation which exist in all three technological variance at the same time which was something of (toward to force). This is state-of-the-art internationally in terms of set-top boxes, in terms of user-friendliness and the quality of services offered. We've enhanced the distribution network, especially through our partnership with Darty and the fact that we bought back Darty Telecom.

Our third objective was to adapt our business model to secure as much as EUR300 million worth of savings on the mobile business to compensate the purchase of 4G frequencies with the sale of assets. We've disposed of Extenso Telecom. We've canceled contracts with distributors. We've unfortunately had to have a redundancy program for as many as 542 jobs. We've renegotiated our contracts with outsources and all across the board we've tried to cut costs and then we've disposed some of our assets by the tower business worth EUR205 million and three data centers for EUR60 million.

So all-in-all in 2012, Bouygues Telecom showed good commercial resilience in an extremely challenging environment and this in itself is very good news. We were able to stabilized our mobile subscriber base. Thanks to the new momentum of B&YOU, we have as many as 318,000 new customers, B&YOU accounts for now 10% of the entire mobile subscriber base at end 2012.

Let me just point out that B&YOU accounts for 80%, while 80% of new customer come from the competition that end at the fourth quarter of 2012 and that in itself is very good news too. Now the pursued momentum in the fixed business with as many as 110,000 Bbox customers at Q4, 2012 not including Darty Telecom. That is a very good performance as well, and so here you have significant growth of the high-speed broadband fixed network.

Our market share grew from 7% to 34%. We have as many as 1.7 million customers since – (1.78) customer for the B&YOU, 11 million for mobiles; fixed subscribers 1 million. Sales down 9% at EUR5.2 billion; EBITDA down EUR364 million at EUR908 million. Current operating profit EUR122 million, down EUR439 million; operating profit EUR4 million, down EUR595 million; and the net loss attributable to the Group EUR16 million. So this is a fall of EUR386 million compared to 2011.

Now, I felt you should have a brief focus on our savings cost-cutting plan for 2012. We were in line with the plan we had announced, EUR151 million was saved in costs on the mobile business in 2012. Let me remind you that the EUR300 million target will be reached. We could see that the mobile marketing costs were down EUR101 million. The mobile operating costs, again down EUR50 million. So there you have your EUR151 million, but at the same time we increased our fixed – our cost in the fixed business and that's because of the significant efforts we had to make to launch Bbox sensation and indeed to develop on fixed line business.

Now, there are two major events for 2013. First, the SIM-only/Web-only segment business is enjoying significant growth, very low cost offers. Very low priced plans from zero to EUR5. So, of course, this takes away from the prepaid customers or the fixed contract customers. That was segment where Bouygues Telecom did not propose to develop its clientele. So although some people are moving away from that, we are not losing that many customers, thanks to that choice.

We certainly expect the SoWo segment to account for more than a quarter of the entire mobile subscriber base. Then there were significant price cuts since the beginning of the year and now the entry level price is nearing on to EUR20. So in this context, Bouygues Telecom is proposing to pursue its strategy, especially working on two major breakthroughs on our technical assets and the marketing of plans that include services, our strategic priorities will be pursued in 2013.

We want to remain the most innovative player on the mobile market and we'll work on the repositioning of our plans including services, and to this end we've recreated value through our demand for data and we certainly hope that one day eventually the 4G will show up. We propose to continue our B2B business. We also propose to pursue growth in the fixed broadband business with the steady innovations and on Bbox Sensation we have a whole roadmap to improve the quality of service and our offers with lots of innovation in this field.

Now, a few words about Alstom. As you know, I'm very pleased with the performances of Alstom. We have a significant stake in Alstom. The sales have been buoyant. The ratio of sales to order is greater than one for the ninth quarter running, 48% of contracts come from emerging economies and that again is very good news and I would like to contribute pay tribute to Patrick Kron who has been able to redeploying the business altogether onto new territories with new products as well.

Alstom's contribution to the net profits was up, EUR240 million compared to EUR190 million in 2011 and there was a dilution loss at Bouygues of EUR53 million in the fourth quarter of 2012 due to the capital increase conducted by Alstom in October 2012. You have the Alstom's numbers on the left hand side.

Now, I'll ask Philippe Marien, our CFO to introduce the accounts and I will be back with the conclusions.

Philippe Marien - CFO of Bouygues; Chairman and Director of Bouygues Telecom: Ladies and gentlemen, good morning. You'll find in your files a memory stake on which you will find the Group's consolidated financial statements and the Bouygues SA financial statements and the consolidated accounts of our five businesses and on our website you have all our financial statements and notes.

Few comments on the income statement; I won't dwell on sales and current operating profit because Martin Bouygues has gone through that business by business. Let me focus on other operating income and expenses minus EUR166 million. This is first and foremost the adaptation plan of Bouygues Telecom, minus EUR152 million, the costs are linked to the adaptation plan of TF1, EUR48 million, so those are the two adaptation plans expenses and plus EUR34 million of capital gains from disposals of the tower and data center businesses. Operating profit EUR1,120 million after account taking of those other operating income and expenses.

Cost of net debt is up by EUR13 million. We have a fall in our financial income of about EUR20 million. That's due to two phenomenons. First of all, we've had less cash on average over 2012 compared to the average cash levels in the previous year. Also, of course, there has been a fall in the interest on that, because we've lost 60 basis points on the interest rate on our cash investments, that's due to a fall in market rates.

Financial expenses are down to EUR352 million. But in application of IFRS, we capitalized the interest on the acquisition of our 4G frequencies. So you have the EUR228 million of the frequencies both at end of 2011 and the 800 megahertz frequencies bought in 2012. That's EUR41 million of capitalized interest, which doesn't have an impact on the P&L, but on CapEx as we shall see later on.

Continuing the consolidated income statement, you will see income tax EUR330 million, that's down very sharply compared to the income tax of 2011. But that of course, is because our disposable income has fallen as well. If you can see the effective tax rate of EUR330 million, you will see that it is, in fact, 39% compared to a little more than 33% last year, that increase in the effective tax rate is of course due to the extra financial budgeted of 2012, which increased the taxes paid by the Group and that finger of EUR330 million is pretty much in line with what we announced in the market as being the extra tax challenge linked to the increase in taxes under the French budget for 2012. In the EUR217 million of share of profits and losses from associates, that's an increase of EUR19 million compared to 2011. You will find the exceptional accounting charge of EUR53 million due to the dilution loss of the increase in capital of Alstom.

After the EUR95 million minus of minority interest, the net profit is EUR633 million. Sales by business area, (Martin Bouygues) has made the comments on that. You then have the contribution of business areas to Group current operating profit, of the EUR533 million of full in our current operating profit of EUR439 million due to the fall in the current operating profit of Bouygues Telecom.

Same is true of course in contribution of business area to Group net profit of the EUR437 million lower net profit of the Group, EUR345 million of that comes from the full in the net profit Bouygues Telecom. You will find the improvement in Alstom's contribution EUR50 million and you would also find in the holding company and other, the minus EUR116 million, the three issues that I have already referred to. The EUR53 million of the dilution loss of Alstom, the increase in taxes, which of course affect the holding company more than anything else and an increase in the borrowing costs at the holding company level.

Just a few comments on the consolidated balance sheet. You see an increase in noncurrent assets of EUR728 million. Of that EUR728 million, EUR726 million, almost all of it reflect the impact of the purchase of the 4G frequencies in the 800 megahertz band, EUR683 million was the purchase price of the license and EUR43 million of capitalized interest.

Current assets is up by just over a EUR1 billion, so EUR1,104 million. I think this corresponds to the increase in the cash of the Group at the end of 2012 compared to the end of 2011. You will remember that the end of October, beginning of November, we issued a bond of EUR700 million which was not allocated to anything particularly at that time and therefore, that increased our cash holdings at the end of the year.

On top of that EUR700 million, you have the EUR192 million of cash generated in TF1 by the sale of 20% to Discovery and the thematic channels, TF1 and Bouygues Telecom recovered EUR234 million of cash from the sale of its tower and data center business. So you have that EUR728 million, EUR234 million and that is the extra EUR1,104 million of cash that we had at the end of 2012 compared to the end of 2011.

Shareholders' equity, an increase of EUR400 million. You have the normal effects on shareholders' equity. Profit which, of course, has increased shareholders' equity by EUR798 million, dividends which have reduced shareholders' equity by EUR608 million. Income and expenditure charge directly to shareholders' equity was an expenditure of EUR89 million, basically this is due to the revaluation of the actuarial calculation on severance payments. At the (end of career) and some pension liabilities due to the fall in discount rates for that evaluations and therefore that has led to an increase in our liabilities and therefore an increase in shareholders' – reduction in shareholders' equity by EUR90 million and that is true for both Bouygues and for Alstom.

Something rather more unusual in the variation shareholders' equity, first of all, the impact on shareholders' equity of the capital increase we launched at the end of the year for Bouygues (Construction) six, that's our employee shareholding scheme, at the end of December and that increased the shareholders' equity by EUR176 million and the impact on shareholders' equity of the sales, particularly the 20% of Eurosport to discovery with TF1 that increased an increase in shareholders' equity of EUR178 million, because as you know as we maintain the control of Eurosport, there is no impact on the P&L of the asset disposal, but simply an impact on shareholders' equity, but EUR970 million more of non-current liabilities is due to EUR800 million, which is the increase in our non-current debt that is due to the two bond issues we launched in 2012, EUR1.5 billion minus the reclassification of our refund in May 2013, which moves from noncurrent to current. The impact is increasing on debt. So you will find the reclassification of (EUR700 million) in the increase of EUR462 million in our current liabilities.

So our net debt is EUR4.172 billion. That's an increase of only EUR310 million compared to the end of last year. How have we got from here to there? We start with the net debt at the end of December 2011 EUR3.862 billion. During the year, we made a number of acquisitions to the tune of EUR123 million. So that's a very comparable figure to that of 2011. The main acquisitions were the Thomas Vale Company, a construction company in the U.K. by Bouygues Construction, Pullman Rail which was purchased by Colas as well as a company in South Africa, and a few quarries in France and Darty Telecom by Bouygues Telecom. That's a total of EUR123 million and of cash out.

Parallel to that, Bouygues (Construction) has brought in EUR122 million. The increase in capital with EUR150 million, but once in December and once in January and this was the part paid in December EUR102 million more. Dividends paid EUR608 million and operations which brought in EUR600 million that of course is down compared to 2011, I'll come to that in a minute.

So you can see that if we stop there in recurring operations we have a level of debt at the end of last year, which was pretty stable compared to the end of the previous in spite of a very considerable drop in the cash contributed by Bouygues Telecom because of the fall in its results. But we have two other exceptionals in 2012, the acquisition of the 4G frequency, EUR726 million, so that of course has reduced our cash by that amount. Compensated to a certain extent by the sale of the tower business, the Eurosport transaction with Discovery and the data center business. So net cash of – net debt of EUR4.172 billion at the end of the year, but if you take account only of the operational cycle, we have a very similar level of debt at the end of 2012 as we had at the end of 2011.

Looking at the operational cash flow, which generated EUR600 million of cash during the financial year. The operational cash flow is down because it's down by quite a considerable amount compared to 2011. That of course is due to the operational cash flow of Bouygues Telecom to a large extent. However, our capital expenditures was maintained at EUR1.433 billion compared to EUR1.658 billion in 2011, so all the businesses really had a tight control of their CapEx in 2012.

The variations in working capital were very low, EUR125 million. Our working capital for the Group as a whole is EUR3.5 billion, so EUR125 million isn't really very much and the only concern the suppliers' debt, if you look at the detail of the input-output table, you will see that for the operating WCR, it has in fact improved in 2012 compared to the previous year.

You have contribution of business areas to group and net CapEx, the EUR1.433 billion of CapEx and as you can see this strengthens the message that I convey to you earlier on. There has been a decrease in investment in some businesses or it has been maintained at the level of the previous year.

Just a word or two about the breakdown of our net debt, EUR4.172 billion; you can see the breakdown by business here and here you find the financial structure of the Bouygues Group that you're familiar with. Most of the debt, of course is held by the holding company, so this accounts for the EUR7 billion of holding company debt and that is in the form of bond debt, the long-term bond debt and then you have the businesses which are either cash positive, sometimes very cash positive or with very reasonable level of debt. Colas, minus EUR170 million of debt, so that's a negligible and Bouygues Telecom, you found what we announced in June and September which is that we wanted to recapitalize Bouygues Telecom so that its net debt would remain at the very reasonable level which is EUR600 million. Bouygues Telecom benefitted from an increase in capital of EUR700 million that Bouygues subscribe to the tune of EUR680 million.

Final issue on financing, we have available cash on EUR9.7 billion, EUR4.3 billion of cash on the balance sheet and undrawn medium-term credit facilities unused at this point without any government's (current) confirmations are EUR5.4 billion. You have the debt repayment schedule at the end of December 2012. This is old bond repayments and as you can see in line with our normal financial policy, it's a very long schedule without any particular peak. We are always below EURI billion to be refunded into any given year and given the fact that we issued bonds at the beginning of November 2012, the 2013 refund is totally covered and the next refund falls due in 2014. So we have the time to think how we're going to refinance that and try and get the best possible conditions on the market in 2013 and for most of 2014 as well. So much for the financial statements at the end of 2012.

Martin Bouygues - Chairman and CEO: Thank you very much indeed Philippe. I'd now like to say a word or two about our outlook and conclude. As you know, the global economic environment remains challenging which is what I said last year, but what we do see today however to qualify that slightly is that in some major areas of the world, things are moving in the right direction and we are witnessing significant growth in Asia, in the United States. Things are starting to move in the right direction as I said and that gives us in spite of everything a little hope in the future. In France, there are a number of bright spots as well in 2013. First of all, we have the public bank to finance local authorities which has been set up, held 75% by the state, 20% by the (KSD depot), and 5% by the postal bank. That is clearly a very significant bank which is going to enable local authorities to access the financial facilities that they need to develop and modernize their infrastructure.

The municipal reductions in France will be held in 2014, that's a favorable thing for us. Traditionally pre-electoral years are usually years of good business in our businesses. Because the municipalities, all of course want to have a good record in terms of infrastructure building employment for the municipal elections and the government is also very determined to boost the construction of residential units and we are sitting on a number of working groups which are advising the government on how to improve that the existing facilities to boost the construction of housing units in France, all this we believe is very much the right thing.

Our Construction businesses have a number of assets. They have a very good order book. We have a diversity in our expertise, we are very present in other areas of the world and I insist on this because I think it's an important issue for us and we have a tremendous capacity to adapt that we've always shown and that we have continued to show and will continue to show.

In terms of our construction businesses more specifically, Bouygues Construction, the business that we already have for 2013 cover 79% of our sales targets, so we're not particularly concerned about that. 45% of the order book is on international markets outside France, particularly in countries which are less affected by the crisis – Hong Kong, Qatar, Canada, and number of other countries too. And profitability will continue to be the most important thing rather than growth for growth sake. So I don't see that there will be any reason to believe that there will be a considerable change in the operating margin of Bouygues Construction compared to 2012.

Bouygues Immobiler, the order book represents 15 months of sales. The residential property market is expected to be stable at best in 2013 but there are opportunities for green property, as we call it, will continue to be seen both in commercial property and elsewhere. We think there is a lot of opportunity there and a lot of things that can be done. In terms of the operating margin of Bouygues Immobiler, it may be slightly down in 2013 because of pressure on prices of new housing programs.

Colas, the order book that Colas has means that the year will get off to a good start. The French market is expected to be close to its level of business in 2012 and should be stable outside France. Colas will, of course, start the benefit from plans aiming to improve its competitiveness. So we believe that the pace of the improvement in Colas is margins will, of course, depend on the pace of increasing activity, particularly in France and of course, in North America.

TF1 we expect advertising spend to continue to fall in France because of the difficult economic situation in France, and therefore TF1 has stepped up the Phase II of its optimization plan, but I consider, that being said, that TF1 is really streets ahead of its competitors in terms of its capacity to rejuvenate itself, to challenge what it does and to really go out and improve its audience ratings. So I am confident in the outlook for TF1 for this year.

For Bouygues Telecom, the market continues to be a highly competitive market. It is continuing to change. As you all know, Bouygues Telecom will continue to transform itself with the aim of stabilizing its EBITDA and improving its EBITDA minus CapEx for 2013.

That brings us to our sales targets for the full year 2013, broken down business-by-business. Bouygues Construction we are forecasting an increase of 1%. We'll see how the year goes. We hope that we will manage to improve that. Bouygues Immobilier plus 4% EUR2.5 billion; Colas EUR13.2 billion plus 1%; TF1 minus 3% EUR2,540 million; Bouygues Telecom down by 7%, EUR4.850 billion as opposed to more than EUR5 billion in 2012.

So total sales targets slight – more or less stable at EUR33.450 billion as against EUR33.547 billion.

The conclusions from all that. First conclusion is that Bouygues has once again showed that it is very adaptable in an economic climate, which is tough, challenging, competitive and undergoing considerable change. We shall continue to draw on our fundamentals. What are our fundamentals? We are very flexible commercially in all our businesses. All our businesses are able to generate regular cash flow, and of course, we have a very robust and sound balance sheet.

Our priorities in 2013 will be continue to transform Bouygues Telecom so as to stabilize its EBITDA and, as I said earlier on, to improve its EBITDA minus CapEx in 2013. Therefore, we believe that 2012 should be the low point in Bouygues' profitability.

So that's the end of my presentation. With my management team, I will give you the floor to answer the questions you'd like to put to me and to us. The floor is yours.

Transcript Call Date 02/27/2013

Vincent Maulay - Oddo Securities: Vincent Maulay, Oddo. I have two questions on the Telecom's business. First, on the network sharing. Vivendi seems to be open to the concept. What would stand in the way of an agreement with the Bouygues Telecom? What about the guidance for a stable EBITDA? What are the assumptions underlying that target? That seems a bit ambitious in view of the significant price cuts you'll have to have this year?

Unidentified Company Speaker: On network sharing, let me remind you that in the autumn, the French government asked the Competition Authority to rule on two issues, roaming and network sharing. The competition authority and I would like to salute the very important ruling of the competition authority on the net against France Telecom and that's an essential issue for us. So the competition authority has investigated this issue, has held hearings of all the operators and all the stakeholders including the telecoms operators over the past few days and will be handing down its ruling in the next two weeks. Clearly, that ruling is going to be absolutely fundamental for the development of the mobile telephony markets in France. That ruling, as I said, is going to be decisive in the future of the market. Therefore, we are, of course, very attentive to what's going to be said. They were going to be giving a ruling on roaming and on network sharing as I said earlier on. On network sharing, I think things have to be very clear. Networks can only be shared if that means that price is going to cut for consumers. But it has to be done so that new economic imbalances are created of the type we've had in the past. In other words, this can only be done between operators that have similar networks in terms of size, otherwise we would return to the imbalances that we are suffering from at the moment. So that's what I can say at the moment. To say that we are (impermeable) to all that is wrong. We are open, yes, why not, but as long as the rules of the game are clear, they have to be sound and they can't create economic imbalances between the operators. I think we've suffered enough from those in the past and it's time that that comes to an end, but things have to be done in the future more rationally, more objectively ,the aim is not to favor this or that operator. The aim is to ensure that consumers, all consumers of all operators benefit, but what we also want to do of course is we need to secure operators and networks. There are several parallel networks and we can't forget that issue either. To answer your question on EBITDA stability, what we have said is that we have a 2013 plan for Bouygues Telecom that we are working on. I can't say any more about that today. We said we would implement a plan in 2012. We did exactly as we said it would and trust us to do the same in 2013. We believe that we're on the right track. Bouygues Telecom, let me remind you has completely re-engineered itself at the beginning of 2012, so we lost no time in tackling these issues very decisively at that time and that has few advantages. Olivier did you want to add something? Just a few figures because I think this will be of interest to the analysts, just to give you some very simple figures, you will see that fall in revenue that we are announcing EUR376 million in that fall. There is a share of the fall in core termination rates of EUR170 million with no impact on EBITDA, that leaves us EUR188 million. We secured EUR300 million in full year, so that's EUR188 million minus EUR149 million, so if you subtract that as well, we do have a work – we have work of transformation that we are continuing and which is underway. Next question please?

Vincent Maulay - Oddo Securities: (Indiscernible). Could you tell us about your expectations in terms of CapEx you saw?

Unidentified Company Speaker: Very equivalent to 2012.

Vincent Maulay - Oddo Securities: There was much less CapEx in construction.

Unidentified Company Speaker: But as far as the Group is concerned pretty equivalent.

Vincent Maulay - Oddo Securities: All right. But the next question, debt was stable this year if you leave out the frequencies and the divestments?

Unidentified Company Speaker: There was a slight change in working capital which is about EUR250 to EUR300 million. We'll probably find it ending up in debt and it should be of around that order of magnitude really not very much.

Nicolas Cote-Colisson - HSBC: Nicolas Cote-Colisson from HSBC. Could you tell us about the 1,800 megahertz licenses on the timetable, but also in incremental terms the cost of additional licenses and in terms of CapEx how does that matchup with your commitment to reduce CapEx Bouygues Telecom.

Unidentified Company Speaker: Well, I hope, you'd be able to give me some news on that, but you don't seem to have much. No, let me show you this map. You can see on this map that the 1,800 megahertz in Europe has been rolled out very extensively and the Goolwa Village is resisting, but I think our regulators wanted to launch the 1,800 without further ado. Apparently, there has been a considerable lobby by France Telecom to prevent the 1,800 4G being rolled out. (Indiscernible), France Telecom uses the 4G 1800 network to make a lot of money because of its roaming income from free and of course you can't use the frequencies twice for the same business, but France Telecom when it does have 4G 1800 frequencies and it rolled them out in September in the U.K., it didn't seem to have much problem with that. So I wouldn't have thought they will pose a problem for France Telecom in France. For those of you who are interested and if you are interested we can send you the information by mail, may be you'd like to have a look at the opinion all the U.K. regulator and the reasons why the U.K. regulator gave Orange in the U.K. the 1800 4G network. There are economic reasons in that ruling, which I think are particular interesting and which should certainly enlightened the debate here in France. So we hope that the ruling will be done on the 18th or 19th of March at the latest, here in France and we're ready for it. We are ready as soon as it's handed down and on the 20th of March we're ready to start. I really don't see why France should be deprived of the 4G network compared to all other countries in the world and I see no particular reason of why it should be. We're ready as I said, as far as the CapEx is concerned. Yes, I do believe that the royalties are really very high. I saw EUR62 million figure which was quoted, it's a large number over 20 years. That's more than EUR1 billion plus the royalties on revenue, which is incremental to all that and I think these are big numbers and I really must say that I saw an interview with the government minister (indiscernible) recently and she said that she realized that telecom business was in difficulty and she thinks that it should subsidize the fiber-optic network and I really don't understand why the industry which is not doing well should subsidize an industry which is doing very well. I really don't understand it. The cost of licenses is very high. We have to work on that. That was a recommendation HSBC. That's a recommendation from HSBC, your colleagues. But in spite of that, the industry, the telephone, mobile telephone industry is in difficulty and I think that's a rather questionable assertion. As far as say investment is concerned, that's our secret. Yes please, next question.

Nicolas Cote-Colisson - HSBC: Out of the 1,800, can you tell us about the coverage, the footprint of your antennas?

Olivier Bouygues - Deputy Chief Executive Officer, Bouygues: No I can't say very much more. That's our secret as well. I wouldn't say anything more about that, I'm sorry. But perhaps I could add some things that the operator which has the largest number of 1,800 stations in France is not Bouygues it's Orange. Yes, but they use it to do something else. So they had to think about that before, didn't they? Next question please.

Stephane Beyazian - Raymond James: Stephane Beyazian, Raymond James. A question about Colas, you're talking about savings you can make in France. How much money can you save? Would that improve the profit margin in 2013? Then a question about the construction business. I'm rather surprised that this assumption, only 1% growth in revenue in 2013, because the order book is up compared to 2012.

Unidentified Company Speaker: Well, you're familiar with our (legendary precautions).

Nicolas Cote-Colisson - HSBC: That's my answer then, but there is a third question about the strong growth in B&YOU subscribers, this EUR10 offers 999, that's very aggressive in terms of marketing. Does this make a big difference to B&YOU's performance?

Unidentified Company Speaker: Well, let me ask Herve Le Bouc to give you an answer for Colas and then we'll come to Bouygues Telecom.

Herve Le Bouc - Director, Bouygues and Chairman and CEO, and Director of Colas: We're not giving you any figures for the effect of our reorganization. There may be a fall of the road market in 2013 and we want to offset that by an improvement in our profitability, thanks to the cuts in costs due to the reorganization. Olivier, for Bouygues Telecom.

Olivier Bouygues - Deputy Chief Executive Officer, Bouygues: On the mobile (part), 60% of our customers were are on the plan of 1999 per month 60%. Next question.

Josep Pujal - Kepler: Pujal from Kepler. I have a couple of questions. Number one, on Colas in the United States, could you give us details about what happened in the U.S? Then do you believe that the problem is behind you, I mean some of your competitors were saying that on the public works market in the U.S., because the markets have stabilized the margin should hold up as well? Then on the Telecoms based to your outlook, you want to stabilize the EBITDA, while CapEx would come down. Could you give us details around this CapEx number on the Telecoms business and what are the implications? The fact that you are spending less on CapEx, is this to say that you would be giving up on that – on the race with others? Are you out of the race or what?

Unidentified Company Speaker: On Colas in the U.S. Herve Le Bouc will answer you.

Herve Le Bouc - Director, Bouygues and Chairman and CEO, and Director of Colas: What happened is this, the market is difficult, for all sorts of reasons, the highway bill as Martin Bouygues said was only approved in June and implemented in August. So the highway bill of course makes it possible to fund a state infrastructure. They weren't able to start their programs until August and 2012 therefore was pretty low in terms of road building activity, and there was also the development of shale gas fields. The price of gas has fallen substantially because of the shale gas discoveries in the U.S. and that activity is not there in 2012. We also diversified rather unfortunately into a low cost market. To answer your question, that's now over because the highway bill has been signed for another two years. So there will be a considerable increase in demand and we have shut down the low cost business. At the end of the year, all the equipment was sold back. The people were laid off and there will be no impact in 2013. Olivier Bouygues is going to answer the question about CapEx of Bouygues Telecom.

Olivier Bouygues - Deputy Chief Executive Officer, Bouygues: Yes, on CapEx for 2013 EUR100 million. We don't want to not be involved in the race, but in 2011 and 2012 we invested a great deal. We renovated our 2G network and that's now behind us so that we can now reduce the level of CapEx to EUR100 million in 2013.

Unidentified Analyst: (indiscernible) Securities. I have several questions on governance. Number one, on the employee shareholdership, what are the latest numbers and in terms of voting rights within SCDM and the employee shareholders in view of the recent operations are there now?

Unidentified Company Speaker: No, change in the voting rights. It remains very stable.

Unidentified Analyst: I think you've been given the detail, haven't you?

Unidentified Company Speaker: We've got all the details, we can give you. There is no problem.

Philippe Marien - CFO of Bouygues; Chairman and Director of Bouygues Telecom: It's Philippe Marien, let me answer that first question. In the brief figures as far as capital SCDM is 20.5% and employees 23.7%, as far as voting rights are concerned 29.2% for SCDM and 28.7% for the employees shareholders.

Unidentified Analyst: Now, in 2013 will that be a new buying back?

Unidentified Company Speaker: The answer is no.

Unidentified Analyst: Any authorization to buy back shares?

Unidentified Company Speaker: No.

Unidentified Analyst: What about the changes, the small changes that makeover at the Board of Directors because apparently somebody from Credit Agricole is moving out to be replaced by somebody else from Credit Agricole. Is there a connection between Bouygues and Credit Agricole?

Unidentified Company Speaker: No, I think we have a very simple relationship with Credit Agricole, (indiscernible) was the responsible for the major development of relations between Bouygues and Credit Agricole through the funding of real estate operations 20, 25 years ago. At that time, it was Bouygues Immobilier which was very much in the forefront of this type of business and then when Credit Agricole purchased Credit Lyonnais. Credit Lyonnais was a historical bank of the Bouygues Group, so clearly our relations could only improve and increase and therefore, we have numerous relations with the Credit Agricole both in France and outside France and we have a very highly valued partner in the Credit Agricole and of course Lucien Douroux who decided that he didn't wish to seek reelection given his age, I suggested to Credit Agricole that they should perhaps have – continue to have a seat on our Board.

Unidentified Analyst: My last question about the performance criteria for the bonuses of the corporate officers, what are the main points?

Unidentified Company Speaker: They haven't changed since last year of nearly – there was the same size and my brother Olivier is concerned and myself has been a considerable change because we've announced the variable share of our compensation for 2012 given that the considerable difficulties we've had with Bouygues Telecom and the reduction in the headcount, even though we were able to claim that variable compensation for 2012, I thought it was quite natural for us, both not to take it and therefore I put in a new rule in the rules that we use which was that if there is a full in the consolidated net profit of Bouygues, there should be a cutoff point and below the cutoff point, we should not be able to claim our variable compensation, given the stock options, because of the Sarkozy policy or Sarkozy's government's policy, my brother and myself have also renounced any allocation of stock options for the past two years so as to just to make life easier.

Operator: (Indiscernible).

Unidentified Analyst: Two questions if I may. Number one, you said someplace that you at Colas, the road business might be down in 2014, isn't that a contradiction with the fact that you said that's an election year?

Unidentified Company Speaker: I was only talking about the second half of 2014. What we find usually happens is that business usually goes well in a year before the elections and elections are always a time, are they not, when the municipalities are up for reelection and they are not always reelected and there new teams very often which come into municipalities, they have to redefine the strategy, implement their own investment plans, all that takes a little time. So I think it's only natural to expect that there is a little time lost in the months immediately following elections, which have in 2014. We think, however, that given the restructuring of Colas in France, (indiscernible) Colas (indiscernible).

Unidentified Analyst: This has nothing to do with the development of the motorways and all that?

Unidentified Company Speaker: No, not in the least.

Unidentified Analyst: Another question. The work that can be done with the nuclear power plants, what is going to happen, is that still a growing concern?

Unidentified Company Speaker: That's continuing. Finland, as far as we are concerned is over. Olkiluoto, we finished our wok there, the EPR new generation reactor, our part of the work is over. Flamanville is very advanced and I think 90% of our work in Flamanville is done, so it's not over, but it's almost finished. I can't say any much more than that.

Unidentified Analyst: What you think then for the future?

Unidentified Company Speaker: Yes, yes, you know EDF has some plans for the U.K. and we are the preferred bidder for the construction of these nuclear plants and we are in the process of negotiating with EDF on that issue.

Unidentified Analyst: Is that a profitable business? Is that…?

Unidentified Company Speaker: Well, I think it's clear that on the new generation nuclear power plants, there has been a fairly steep learning curve. Nobody has concealed that, neither EDF, nor Areva, nor for the civil engineering people that we (hire). I think for the turbine manufacturer, it's the same thing; there is a learning curve there. We have new complex technologies which have very high security requirements and clearly there is a learning curve that you have to go through there, we've done two of these things and we've learned a lot. No further questions. Thank you very much indeed ladies and gentlemen.