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Earnings Transcript for DG.PA - Q4 Fiscal Year 2021

- : Elodie Rall - JPMorgan Nabil Ahmed - Barclays Luis Prieto - Kepler Gregor Kuglitsch - UBS Tobias Woerner - Stifel Jose Arroyas - Santander
Xavier Huillard: Good morning, everyone. Thank you for taking part in this presentation of our 2021 results. I hope you can all hear me. I also hope that you found on our website the presentation of our results, which you'll be able to read through this morning. We're at the Archipel Building this is our new HQ in Notter. At my side there are several of my colleagues from Executive Committee especially Christian Labeyrie who's seated next to me; plus the main -- the heads of the main business lines that will be able to answer questions you have later. First of all a few pictures quickly as is our custom. The first one is just to illustrate the fact that we opened last December, the Strasbourg bypass with Jean Castex, the French Prime Minister who used the opportunity firstly to congratulate the environmental excellence of the project but also to give a strong speech about revamping road mobility, emphasizing the fact that roads are essential for the development of France. He even added that roads were no longer to be viewed as the enemy of the environmental transition and shouldn't be seen as something that opposes rail travel. Both these types of mobility go hand in hand was his point. On the next slide, we see that we took charge a few days ago in January for a 30-year period of the Manaus Airport. Will also be gradually taking charge of regional airports located near Manaus six further small airports in Brazil. Manaus is the number three cargo airport in Brazil, especially most importantly its infrastructure is completely crucial for the economic and social development of the Amazon region. Our project is to roll out there. Our environmental action plan just as we did in Salvador, which since our arrival in 2018 has become the most sustainable airport in the whole of Brazil. Next slide. We're showing you that we finalized the financing of the B247 Federal Road in Germany, PPP 30-year Motorway investment around €500 million. This is a project, which is a good illustration of the development of the PPP model in Germany. I'm sure you know we already said this we're a leader in this business area with five PPPs that we've won already. Next we have a picture of the project designed by VINCI Energy, it's a floating photovoltaic farm on an old quarry that was rehabilitative of Vinci Construction. I'd add that the solar panels are placed on water, which is a plus. It increases the overall energy yield of the facility because this water naturally cools the 44,000 PV panels that after the building of this will make it possible to provide electricity for around 6,400 households. Here we have an illustration of a major project that we won along with our Italian partner under the gigantic Lyon Turin railway project. Our portion is 23 kilometers of bitumen tunnels, which is 46 kilometers of tunnels all-in-all plus around 70 safety branching tunnels. This should be a five-year project employing around 1,650 people. Lastly, VINCI Immobilier real estate is developing part of the athlete's village and 6.4 hectares of industrial brownfield. It's complex because first of all it's designed for the Olympic Games in 2024, 6,000 beds for the athletes 33,000 square meters of services and workspace. And afterwards it will all be converted just after the Olympics to turn it into a new neighborhood, blended neighborhood residential plus offices. And during both stages of the process, careful attention will be played to environmental performance as well as social performance. Furthermore this is a beautiful illustration of the concept of urban recycling. A great illustration of the zero-net artificialization strategy, no soil ceiling that we talked about already at the beginning of the year. Those points made, I'd like to say VINCI is doing well after 2020, which showed our great ability to adapt great resilience. Now in 2021, we're booking a strong rebound revenue for the full year going beyond 2019 up around 3%. Our order intake very good, order book looking very good; a clear turnaround in margins as well. Now an important salient point, free cash flow up. It's a record level €5.3 billion. This of course is due to an uptick in overall revenues, but it's also thanks to a great deal of work to get cash in from billings. VINCI Airports cash flow went back in the black in the second half of 2021. This is thanks to major for its intense efforts made to cut both OpEx and CapEx. Second item, our Works business increasing their operating margins. Operating margin levels are record highs, 6.5% at VINCI Energy and a gain of 40 basis points reaching 3.7% at new VINCI construction versus 2019. Next item, motorway traffic has recovered very quickly as soon as restrictions were lifted. And for them, since around the second half of 2021, its level has reached a higher level than the pre-COVID level. We also benefited this year reap the benefits of continued rollout of our strategy for the environment and in-depth strategy. We've got all of our employees on board in all of our geographies and we'll be talking about this in more detail at our next Annual General Meeting. Lastly, at the very end of the year, 31 December of the year 31 December, we've closed on Cobra IS acquisition, which we'll be building a global leader in engineering services relating to energy and also boost our development in concessions for renewable energy. All geographies, this is Page 12 of my slide show, all geographies are seeing growth versus 2020. The most active geographies are also growing versus 2019, especially on the left hand side of the slide, you can see, North America growing very significantly, reaching now almost €4 billion in revenue. We've made major progress in that part of the world over the past few years. Now to delve into greater detail in each business line, starting with VINCI Autoroutes, after the first four months of the year, they were a little bit more difficult, particularly April as you'll remember, where there were still some lockdowns. So after that period, light vehicle traffic quickly recovered reaching levels above traffic levels for 2019. That was in the second half, completing the year at minus 5.3% compared to traffic observed in 2019 during the same period. To talk about heavy goods vehicles, heavy vehicles this was much better. It continued to be above 2019 levels throughout the year, ending the year plus 3.1%. Interesting to observe, we feel that there's still a great potential for growth. Two phenomena here
Christian Labeyrie : [Foreign Language] Thank you, Xavier. Good morning ladies and gentlemen. So I'll go into a little more detail on the figures that Xavier has presented. First of all, revenue, which was up in 2021 and 2020 across all our businesses, because overall we are up 14% over €49 billion. And with our VINCI Construction and VINCI Energy were even above were up 3% on 2019. Over the year, the increase is particularly strong in concessions even in the airports, which -- whose revenues are very similar to that of 2019. This is not yet the case of VINCI Airport, because VINCI Airport is still down at minus 55 on 2019 due to passenger traffic, which is still quite low. VINCI Energy was up 10% both on 2020 and 2019 and VINCI Construction is up over 13% and has now reached a level above that of the pre-crisis. At constant scope and FX, revenues are up 13% with scope effects representing €500 million in revenue additional of which €300 million for VINCI Energy. This reflects about 50 acquisitions of which 30 completed in 2021 mainly in France and Germany and in the United States. We should also point out the 100% control taken of Urbat Promotion, which is a company in which VINCI Immobilier took a 49% stake a few years ago and which has €150 million in revenue for the full year. Currency impact is low. The depreciation of currencies versus the euro, offset by appreciation sterling, offset the depreciation of the dollar and some Latin American currencies. Looking now at the breakdown of revenue between France and international business in 2021, moving on to the next slide. We see that -- this was a similar increase between France and International, but comparing to 2019 we see that France is back to 2019 levels, whereas international business is up, which means that international business in our revenue has increased. It's gone up from 45% in 2019 to 47% in 2021. Of course this is excluding COBRA and with COBRA in 2022 over 50% of our revenue will of course be generated overseas. Operating income next slide up strongly €4.7 billion, up €1.9 billion on last year, but we're still below the 2019 level to the tune of approximately €1 billion. VINCI Autoroutes post results very similar to 2019 and VINCI Airports as Xavier pointed out is still showing a loss -- but the good news is that in the second half, VINCI Airport came back with a positive result reflecting the drastic cuts that were implemented after the beginning of the pandemic in March 2020. We're very happy with the results of VINCI Energy and VINCI Construction whose results are up strongly €1 billion in revenue for both of these businesses 50 basis points more margin. Most of the business in the geographies have contributed to this very strong overall performance with the strongest synergies in the sector. VINCI Construction in its new structure with Eurovia has a margin of 3.7 versus 3.3 in 2019. It had not reached this level for many years. This increase reflects cuts in previous losses through the reorganization of the business in oil and gas in 2021 and completion of some difficult project. The first positive impact of the merger between VINCI Construction and year-over-year this improves profitability in 2019 with a significant increase in VINCI Construction whose margin stood at 3%. SG&A approximately 3% which was the margin that you've become accustomed to. And as VINCI Immobilier although the amount is lower it still shows a strong increase on last year but unfortunately we have not yet gone back to 2020, pre-2021 levels due to increases in the cost of land and technical costs. So, looking at the income statement operating income in construction where we had a loss previously -- we are now back to a positive result this year even though we have not yet gone back to the very high level of 2019 but it's still an improvement. The financial result here is slightly up on previous years reflecting variation in the other direction. We've reduced the euro and the cost of debt in euro with a coupon of close to zero for and the amortization of long-standing debt for Cofiroute. And we're continuing to reduce the cost of debt in euro and we had to pay more for sterling debt in order to refinance London Gatwick. So, the financial result we have a very strong increase in corporate tax double that of last level -- last year's level. We have a nonrecurring item of €400 million which is the impact on deferred tax liability of the increase on corporate tax in the UK starting 2023. It's not a cash impact, but it does have an impact on our results and the €200 million in the bottom-line. So, overall €2.6 billion is the net result of a double that of last year which was a low level a low base and not quite back to 2019 and we hope to reach that this year. If we adjust for UK tax that's 2.5 billion in income generated this year. Next slide. What is the analysis and debt variation -- with an increase in debt of €1.3 billion or €18 billion to €19.5 billion. But this takes into account the check we wrote for €4.2 million to acquire ICS. And this -- we have free cash flow of €5.3 billion which is a historic level, historic record versus €4 billion last year and €4.2 billion in 2019. EBITDA not back to 2019, but quite close to that €7.9 billion. Working capital requirement €1.6 billion further improvement not quite as good as last year, but much better than what we usually have with a strong contribution from VINCI Energy and VINCI Construction. That's the blue or green shaded part of the chart. CapEx really kept under control, even down CapEx from €2.9 billion to €2.5 billion over three years with a carryover, the investment in airports. But part of this is due to a genuine reduction and impact of acquisitions namely that of Cobra. Dividends and miscellaneous up to the tune of €2 billion. We have the dividend which was paid in 2021 to the tune of €550 million share buybacks which picked up again from October and now stand at €200 million per year, €600 million over three months. So those are the flows for 2021. So what you should keep in mind is the free cash flow which is really exceptional €5.3 billion. So, if we analyze how we built up this free cash flow, well you can see the profile of cash flow over the past three years which makes it very difficult to make forecasts. I'm usually very cautious as you know when you asked for guidance on free cash flow in November 2021 we're at €3.4 billion which was slightly up that of 2019, whereas we only had €2 billion in free cash flow in 2020. But we were expecting that December given the fact that we have a lot of cash inflows from VINCI Construction that we would have €1 billion in December as was the case in 2019 and not 2020 which is an exceptional which was two years and what happened in 2021 is exceptional because we generated in December €2 billion in cash flow to achieve the front level of €5.3 billion. But that was -- you will understand very difficult to forecast the major part of VINCI Construction's cash flow is achieved in the last -- in the closing months of the year and the same goes for VINCI Energy. So, we always prefer to be prudent in our forecast when we give guidance on free cash flow. Next chart shows that we have moved above a threshold here looking back over the past 10 years. We had €2 billion, €2.5 billion of free cash flow per year. And now we've moved to €3 billion to €3.5 billion. And over the past three years, we've done about €4 billion and now we're over €5 billion. But what I would say is that we should not extrapolate that level for the next year. That would not be reasonable given the impact of what happened in December '20 and 2021. But perhaps €5 billion will be a sort of benchmark if we want to come up with a reliable forecast and for the years ahead. VINCI's balance sheet is very strong. It comes as no surprise to you notwithstanding the acquisition of Cobra accounting for €4.2 billion in our committed capital which is still below that of two years ago. And as you can see we have a strong increase to €4.7 billion in working capital over the same period. Shareholders' equity is up and net debt is actually down by €2.4 billion even though we paid out as I said €4.2 billion net cash to acquire Cobra. So next slide, nothing new. We still have a high level of liquidity, €18 billion which is the level of 2020 almost even though we have the acquisition of Cobra to account for unused credit lines to the tune of €8.5 billion with €500 million of Cobra. And credit ratings we haven't seen S&P yet. We will be soon but I think we'll we should be looking quite good. And we hope to keep our long-term rating stable at S&P and with Moody's. As I said, we issued a CSR bond with a coupon close to zero. And we also redeemed just over €1 billion of Cofiroute bond which has contributed to reducing the cost of debt in the same token we refinanced in order to avoid any liquidity concerns the debt of Gatwick to the tune of €750 billion. That's a high cost, because interest rates are starting higher than for euro we had to pay, the price for that in order to refinance. And my last slide, I recall that over the past the cost of debt has constantly gone down even though the structure of debt currency has changed. Five years ago, it was almost entirely in euro denominated. And now with Gatwick American concessions and acquisitions in the dollar region, we now have net debt, which is only 59% in euros and 41% non-euro-denominated. And this means that looking to the next two years, I don't think we're going to be able to significantly go below that. We'll probably have to go slightly up given what has been done by the central banks.
Xavier Huillard: Thank you very much Christian. Thank you this is for all these reasons, we are moving on to 2022 very commonly and confidently. Well, because our businesses construction energy and mobility place us at the very core of the main challenges worldwide. These challenges are to transform our cities and buildings to make them more sustainable more virtuous from a point of view of the environment and energy usage and also more pleasant to live. Other challenges such as the bringing the digital revolution into all of our industries and human activities, de-carbonizing mobility, all forms of mobility, stepping up energy transition by developing green electricity within the energy mix, enabling the development of low carbon hydrogen which is a prerequisite for several industries. And in our opinion is going to develop in the area of heavy traffic, heavy transportation such as trucks. We also have to systematically look at projects from the vantage point of their carbon footprint and preserving biodiversity. We're to further develop the circular economy to reduce our impact on global non-renewable resources. VINCI is very much involved in all of these challenges and is able to provide solutions to all of these challenges, which all of our 25,0000 employees are very excited about and these are also major growth drivers for us in the future. Let's now come back specifically to 2022. There are a couple of slides on 2022, one on motorways and one on airports. Now, our belief is regarding VINCI Autoroutes, we've seen good trends in recent months. This is visible on the slide here on Vinci Autoroutes. This should be page 31. Our expectation is annual traffic in 2022 that will be above traffic, we booked in 2019. At VINCI Airports, you'll remember its positioning is more in the area of tourism and discretionary travel versus business. And it's different from other major airport players. We've got about a split of 80/20. This is why we believe, this will help us recover continue turning around air traffic in 2022. Our central scenario is that – in 2022, we should reach about 60% 6-0 percent of the 2019 level for the full year. The figure of 60% is very important, because 60% would mean we'd produce at VINCI Airports a net income, which would be near breakeven. At VINCI Energy, we feel we should continue growing all the while keeping a high EBIT margin as booked in 2021. At VINCI Construction, the intention is not necessarily to focus on growth as such, but first and foremost to continue growing the EBIT margin, becoming even more selective than we were in previous years. So all in all, taking to account all of this our belief is in 2022, our net income will be above the net income that we booked in 2019. This is the confidence that makes it possible for the Board of Directors to propose to the next Annual General Meeting on 12th April, a dividend of €2.90 per share. I'd remind you €0.65 [ph] was already paid as an interim dividend at the end of 2021. The dividend is of course taking into account the recovery, the rebound we've talked to you about. It's also taking into account the record level of free cash flow. And first and foremost, shows the great confidence we have in the future. At this juncture usually I talked to a bit of our environmental and social policies. We have some slides on this in your booklets. But I believe in the next few minutes, it probably is more interesting to use the opportunity to give you greater detail about Cobra IS. Cobra IS is a group of companies active throughout the value chain of energy i.e. in engineering, construction, maintenance. Furthermore, they're able to develop finance and operate renewable energy facilities. Cobra IS has about 45% of its revenues in Spain, 9% in the rest of Europe, 34% in the Americas, mainly in Latin America, 12% rest of the world, particularly Asia, Oceania. All of this via flow business, which means small and medium-sized deals through a network of around 450 business units, which are well rooted in several different management regions. This flow business varies from one year to the next but it's around 67% of the total revenue of Cobra IS. The remainder is other projects, multi expertise projects were integrated ones larger ones usually – usually bigger than €30 million project like VINCI Construction. These can be very large projects indeed several €100 million. Some examples, some very high-voltage power lines and power substations in Brazil. These are easily done through PPP contracts. Some of these 500,000 volts. I don't know if that means anything to you but this is a lot covering 1000 kilometers in Amazon Forestland. Another example of power plant, cogeneration 350 megawatts in Mexico. These are operations that have already been done and several of them are currently underway. Critical command and control systems supervision of road infrastructure and tunnel infrastructure, an example in Australia. Cobra in this segment has developed its own solution, which is already outfitted 2,500 kilometers of roads and 3,000 kilometers of tunnels. Another example offshore platforms for collecting and transforming electricity from offshore wind farms activates [ph] with equipment vendors such as Siemens ABB and GE. Clearly, potential in this area is quite significant in all geographies and especially in Europe and the United States, at least for the time being, I suspect this will change. But for the time being, there are few groups able to provide these highly complex services because there's a blend here of metal structures, electromechanical equipment, that's often high voltage. And much of this being done at sea, which makes things even more complex. I think of two projects we have in partnership with Siemens that are underway right now for the North Sea client is Tenant. Now of course Cobra is involved in renewable energy production fields. They were the first in Spain to be active here as a builder OPC as our phraseology or more broadly as a developer constructor builder. Cobra first of all began with pilot projects around 25 years ago. And now gradually has done renewable energy fields via 50 land wind farms around 2 gigawatts in all. They've had several thermal solar projects and 36 photovoltaic fields, all in all producing 2 gigawatts. These assets are in operation already. Generally speaking, they were sold by Cobra at their parent company, during their ready-to-build stage or ready to reduce stage, which is why we didn't take over assets in operation, we took over the development platform as well as its project pipeline, which are now very much part of the VINCI Group. Renewable energy market as you know is growing strongly. Cobra's portfolio which is currently being developed varying degrees of maturity representing approximately just over 14 gigawatts, total potential installed capacity 25% of which is onshore wind, 75% of which is photovoltaic located – well 35% of it located in the Iberian Peninsula 65% located internationally. Plus, there's some biomass projects as well as some offshore wind projects. I'd suggest that quickly to wrap-up, we talked you through a couple of these projects. We have slides on these toward the end of your booklets. The first slide, slide number 43, this is a project in Brazil, it's a photovoltaic project. It's a pretty big one. The power is 570 megawatts. The project is almost ready to build. It will be in the very near future and CapEx in euros will be approximately €350 million, very interesting to observe that. This gives you an idea of the magnitude of the CapEx cost of a one gigawatt project. You can do the calculation one gigawatt of photovoltaic cost approximately €620 million. This project was foreseen. Electricity selling will take place 50/50 through merchant called PPAs 50% sold through the market. Market prices as you know in the spot market for green energy market prices are quite high well above, what you could get after negotiating a PPA. This project just like in the following projects IRR – project IRR, we would call high single digit something is even better than that. The second project I wanted to mention to you – this one is in Ecuador. It's an onshore wind project, a concession covering 25 years ready to build in the very near future in all likelihood in the next few weeks or months. Ready to build means, you've got all the permits and authorizations the right to connect authorizations to build the connection lines and to in this instance install the wind turbines plus the environmental permits. Only once you're in that situation and you've got the actual ability to put together the funding in line with expected revenue, once everything is ready, then you begin the CapEx, and you are in ready-to-build situation. Once you done your CapEx, then you can produce and that's what we call, ready-to-produce. Here is well, if you do the math for this Villonaco product in Ecuador onshore wind, CapEx €175 million now if you do the calculation you can see CapEx per gigawatt in onshore wind in that country is above €1 billion so well above photovoltaic that I mentioned earlier. Nevertheless, the producible i.e. ability to produce power is greater in wind due to greater regularity of electricity production from wind production. Wind blows even at night when there is no light for your photovoltaic panels. So the third project is located in Spain. This is Photovoltaic project power 140.4 megawatts. We hope it will be ready-to-build midway through 2022 CapEx €72 million. You can also calculate the amount of €630 million per megawatt in this area of photovoltaic. A last point, the Morecambe project in the Irish Sea, this is an offshore wind project won in the first half of 2020. It's an exceptional site. Firstly, it's near the coast. Next, the geotechnical conditions are good. A lot of development time is required. Offshore wind one of the features here is that, it takes years between the time you begin your development and you can actually begin generating power usually in this type of project like in the Iberia Sea, we're hoping to reach ready-to-build by 2026, which means four years down the road because we have to fine-tune geotechnical knowledge due the environmental studies on flora and fauna in this area of the sea. Then we have to do all of this detailed engineering studies including the power outflow line that you use to connect to the land power grid. Then one very last slide. This is on the Kincardine project in the North Sea. It's not a concession. We didn't take over the concession portion of the state at ACS. We just took over the construction portion, which is now completed, wrapped up around September of 2021. This is an experimental pilot operation of floating offshore wind farm, a special feature here. It won't be the case for very long. Things are changing. But for the time being this is the facility using the most powerful turbines in the area of offshore -- floating offshore wind farms. Floating offshore wind is the new frontier. This way you can make the facilities more distant from people who live on the coast. They don't see them from the coast. This reduces the constraints. You can use larger surface areas of the sea since you're far away from the coast. Don't do the calculation of CapEx per gigawatt there, because the price is huge. But it's again due to the fact that this was an experimental operation I emphasize that. It was done in very good conditions by Cobra in terms of the EPC. The actual build it was delivered and it's now producing generating power. Therefore, the authorities that had entrusted the operation to us have also entrusted us with another floating offshore wind project also in the Steve Docklands. This will be 100 megawatts of capacity. Those are our points. Now, of course, we'd be happy to answer any questions that you might have. Thank you.
A - Unidentified Representative: [Operator Instructions] First question from CIC, Mr. Moulenq.
Jean-Christophe Lefèvre-Moulenq: Can you hear me?
Xavier Huillard: Yes. Welcome, Jean-Christophe. We can hear you loud and clear.
Jean-Christophe Lefèvre-Moulenq: Thank you so much, Xavier, hi. Hello Christian Labeyrie, and good morning to the Investment Relations team. Two questions. On the improvement of VINCI Construction results, we saw the margin up 70 basis points with Eurovia construction. Can we consider that Eurovia has significantly improved its EBITDA margin to the tune of 4.5%, 5%? Or would you rather not answer the question bearing in mind that the United States has picked up nicely. Second question on the VINCI Energy, Cobra scope. VINCI Energy well, which of the four divisions improved its performance in order to be able to post 6.5%. And on Cobra, could we have an idea for this year next year of the current CapEx. And for the CapEx of the companies held, which managed the 15 gigawatts?
Xavier Huillard: Well, I'll take the questions as they were as and if I forget any of them then please jog my memory. We won't go into detail on who in crews contributes the most to improving the VINCI Construction margin. And Pierre Anjolras decided outside of France to set up a structure, which includes all the businesses. For example, construction or ex-construction business of Eurovia in the UK under his authority. So it has to be considered as a whole. But what I can say is that, yes, you're quite right, Eurovia performed well in 2021 across almost all of its geographies. But this should not be considered or to mean that the other division did not perform well. All of our VINCI Construction divisions posted good results, including VINCI Construction France. And that is indeed one of the part of the good news. On the rest of your questions, now you asked a question about VINCI Energy, and I'll come to that in just a minute, Arnaud Grison will answer the question. And you have a question I believe on the CapEx of Cobra. Cobra for the main part of its business is very similar to what we call the service business of VINCI Construction, VINCI Energy and does not generate significant CapEx. We need trucks drills and equipment items, which do not represent a major investment. So most of Cobra's CapEx mainly reflects our ability to launch the CapEx in renewable projects, and this will depend on the rate at which they will be launched. And this is why I put some figures of CapEx in the photovoltaic projects in Spain, PV in Latin America and Eolia onshore, wind farm onshore in Latin America, et cetera. I gave you some idea of the CapEx that is required depending on the kind of project -- product we're dealing with and depending on the geography, everything will therefore depend on the rate of which in these geographies we're able to implement. In other words, to move to the actual construction. I can't say much more than that. Arnaud?
Arnaud Grison: Hello Jean-Christophe. Well, like VINCI Construction all of our divisions have picked up. None stands out. It's a collective improvement in performance with a decentralized model and each component contributes to the performance.
Jean-Christophe Lefèvre-Moulenq: Okay. Well, that's clear. Thank you very much.
Operator: Next question comes from the line of Elodie Rall from JPMorgan.
Unidentified Representative: Yes, JPMorgan has the question. Go ahead.
Elodie Rall: Yes. Hello. Good morning everyone. Thank you for taking my question. First of all, first observation on contribution of contracting generally. Apparently inflation in raw materials or labor hasn't had a significant impact on contracting margins. That had been to some degree the fear we'd had. Could you confirm that's the case though? Another point regarding 2022 margins in construction, you are to make major progress compared to 2019. This is clear 3.7%. You'd have in mind to reach 4.5% or 5% for construction business. Question, is this conceivable with the timeline in 2022, 2023? Another point, energy. No doubt about it. With the integration of Cobra you produced guidance in revenue. I suspect you're tying things up somewhat the order book. But you're very confident when it comes to margins. Margins would be in line with the best in the class. So, positive surprises in 2021, 6.5%. Does this mean that the division including Cobra might go beyond 6.5% in 2022? If I might ask one last question on the dividend policy, where do you stand payout is well above the 50%, which was customary? Results were lower 64% in 2021. Airport businesses won't be back to normal in 2022. So we continue to have a payout that would be in the higher end of the range versus the past? Thank you.
Xavier Huillard: Thank you to Elodie and good morning. I'll go through those in opposite order dividend. We're not taking a commitment as to future years. You're right when you say, payout. We had decided to not focus too much on that during the whole pandemic period. It's also the case for the 2021 dividend. But I can't say how things will happen in the future. All I can say is that probably next year's dividend will be up compared to the current dividend but that's pretty obvious and in line with our guidance in terms of increased net income. Regarding Cobra I don't know why I talk about a drop in revenue but to some degree you're right. There are two points here. Firstly, we didn't take over all of the scope that previously was called ACSIS. There were several carve-out complicated operations and wouldn't make any sense to go into those in detail. But the interesting thing is to look at the track record and the future trajectory, but not to focus on the past volumes because it's not exactly the same scope. Second point. COBRA considering the geographies where they're located and considering the size of their businesses which tends to be somewhat greater than VINCI Energy more similar to what you see in construction. So, clearly the revenue depends on the pace of the large-sized projects especially the major projects, particularly the projects that were in charge of i.e. concessions where we can or not post and deferred start-up of BBC depending on purchasing conditions for some of the equipment. For instance when you do a PV field, there's a big investment you've got to make when you move into the ready-to-build phase i.e. you're going to buy the solar panels. Panel prices there are times when they're very low-ish and there are other times when they're really high. So, some of the cleverness is to take options to buy PV panels at the right time so you don't worsen the IRR of the entire deal. And this of course has a knock-on effect on revenue flows. This is the case for major projects. It's not always smooth running the entire time. But in the case COBRA their major projects are also impacted by the fact that some major renewable energy projects can be postponed or sometimes speeded up for external reasons such as the price of certain types of equipment. Now, regarding margins just look at the past track record. We're confident yes including starting as of 2021 should be reaching margins that are at the top of the class in their industry. That is what we've said and you can deduct as you would like. We're talking about the top of the class which also includes VINCI Energy, but not only the change. Now, margins in construction I made a mistake once several years ago forecasting something, so I won't make that same mistake again. We've just said they'll continue to be positive period. We won't go further than that. We're not talking about 10% or anything that would be unrealistic, but we're talking about ending up at margin levels that we've already reached in the past between 4% and 5%. Regarding price impacts inflation, Pierre Angeles might want to say something about this.
Pierre Anjolras: I agree raw materials prices are fluctuating quite a bit right now. We have to realize remember that if you look at VINCI Construction's activity most of it about 80% is infrastructure work. So, public work -- mainly public orders government orders. These are contracts that are indexed with revision clauses sometimes cost plus fees. So, sometimes that's a perfect revision. 20% of our business is construction buildings about half of which is also government contracts and another half basically is private contracts. Here these are lump sums. We're agile and we apply the same techniques as Xavier already explained to us. When you're talking about procurement we secure the main purchases early on. As soon as we get the order so that we're not hit by any future fluctuations which is why all in all we do very agile, of course and very responsive, but all in all we manage to contain inflation in raw materials. The residual risk which I briefly touched upon doesn't have as much to do with prices inflation but rather availability. Maybe Arnaud could build on this just very briefly which is something that did disrupting slightly towards the end of the year.
Arnaud Grison: Yes, our revenue includes cost advancement. So this delay in supplying job sites and delays revenue recognition. We saw this through the end of the year. There was a delay in growth and revenue due earlier to some supply delays, where it took longer to get some supplies and also some major electromechanical equipment that was delayed.
Unidentified Participant: Thank you very much, everybody.
Unidentified Representative: Next question from Nabil Ahmed from Barclays. You have the floor.
Nabil Ahmed: Good morning, everybody. Three questions, if I may. First, Cobra. You're saying revenues of €5.5 billion this year. I think you communicated on revenue around €5.8 billion earlier. [Technical Difficulty].
Unidentified Representative: We can no longer hear Nabil. Okay. It will come back. If you can hear. You maybe able to hear us, but sadly, we cannot hear you. So which is hope we can overcome that technical problem. Mr. Ahmed has lost the connection. So while we wait, we don’t have any further questions on the French line. So I'll hand over to Jess [ph] for questions in English.
Operator: Thank you. So the first question comes from the line of Luis Prieto from Kepler. Please go ahead.
Luis Prieto: Good morning. Thanks a lot for your time this morning. I had a couple of questions very briefly. The first one regarding working capital management last year. If you could give us a bit of light on what the drivers were behind the pretty strong performance that would be particularly useful? And the second question is regarding Cobra IS. In terms of operational renewables capacity already in 2022, could you give us any sort of guidance how many megawatts could be actually producing energy by the end of the year? And connected to this, is there any particular year over the next eight, nine years of full development of that pipeline that you acquired in which we should see a large percentage of the capacity coming or being commissioned? Or is it going to be very linear? That’s everything. Thank you.
Xavier Huillard: Christian, will understand the question. I didn't quite understand.
Christian Labeyrie : Well, I understood the question, but I don't know we have an answer to the question. As I tried to explain, when you talk about VINCI capital, it's €1.6 billion in variation. It was €2.3 billion last year. So over two years, that's a lot, it's almost €4 billion. But that's versus €50 billion in revenue or €40 billion in VINCI Energy and Construction, it's not an awful lot. So it's very difficult to draw any explanation or conclusions on the figures, because a large part of these amounts are settled at the end of the year, actually booked to the accounts. Last year, we felt that our clients, whether private or public sector really made an effort to support the economy, in particular in France, but not only in France, but in many countries where we have a presence in Europe and this is what happened, again this year. So I don't think we can expect this to happen every year. So this improvement mainly concerns VINCI Construction and VINCI Energy. Now the question is, is that it's mainly focused on the end of the year. What conclusion can we draw for them that? Well, I don't think there's much that we can conclude from that. We'd like to have more visibility at the beginning of the year, in terms of what will happen at the end of the year for example, but we in actual fact, we don't know. And what we hope is that we remain at an average level at around €1 billion. But -- it may only be €600 million it may be €1.6 billion versus €40 billion in revenues. If we added Cobra to that, it will make the analysis and forecast even more difficult. But there's nothing -- there are no sort of material items, no significant down payments. There are down payments, but then we have them every year. But the fact is that the business was handled more -- it was generated more through smaller transactions for VINCI Construction. But we -- if we have a big project as we did in 2020, then we have done payments on which we were not banking initially. That's all I can say. I'm sorry it's not very precise, but I can't commit to very much if only to say that, people are doing their very best on the ground, the business unit heads, financial controllers, everybody's working hard and the cash culture is very much part of our culture as it is with Cobra and this is what we saw when we did an update with them recently. Regarding Cobra your question, the opportunity to dwell on a point arising from Jean-Christophe's comments earlier. And I didn't correct once more an error on the part of Jean Christophe which is that the platform for development is with us 100%. We don't share it. The agreements with the seller ICS, simply mean, when a project because we have a project say for 1.5 giga reduce -- comes to maturity to the ready to produce stage for production of power. Then we have to propose to the joint venture to buy it at market prices. But in all the preliminary phase of development and construction, we are 100% in control and that's very important because these development projects are very complex and it's important to have overall control. And to respond to your earlier question what we've said is that given the pipeline of projects and the maturity of the deals that we have in the pipeline, we should be able to generate one gigawatt per year to start off with. But as the market is literally exploding in a positive sense. It's in very rapid growth. We hope that we will within the next few years be able to cruise at a level of approximately 1.5 gigawatts a year which is pretty good because having one gigawatts in offshore wind farms can be done achieved fairly quickly. The drawback is that it takes an awful lot of time to come through as you've seen in the North Sea of Scotland, 26 gigawatts were attributed a few days to some companies mainly oil and gas companies. And these 25 gigawatts will only come onstream in actual fact in 2030. So in offshore wind farms, you can very quickly produce a large amount of gigawatts, but it takes a long term to develop. But on photovoltaic plants on the PVs which are by definition land projects a one gigawatt project is very rare. Usually, we're talking about projects of 50, 100 gigawatts a little bit along the lines of what I was talking about earlier producing one gigawatt in the PV means that you add a lot of projects. So to be clear one gigawatt per year seems reasonable given the pipeline that we took over when we made the acquisition.
Q – Luis Prieto: Thank you.
Operator: Your next question comes from the line of Gregor Kuglitsch from UBS. Please go ahead.
Gregor Kuglitsch: Hi, good morning. I hope you can hear me. I found your comments on the sort of various projects in the renewables side interesting and I think you gave one particular example on IRRs. So on Brazil, I think you were talking high single digit. I wonder if you could sort of give us a range perhaps for the other projects. And maybe a point of clarification if these are sort of unlevered IRRs basically and I guess they are and to what extent you would basically use nonrecourse debt to kind of juice those returns up. I guess if they go into the JV with ACS there would be some debt attached to them? So that's sort of the first question. Second question is -- can you give us a little bit more detail on the bypass in Montpellier, bypass that I think you've reached an agreement on sort of -- I think, it's in ASF but if you could just give us how it works in terms of how do you get remunerated for that? Or is it just essentially a new bid to the concession? And then the third question is just, coming back to -- and sorry if I'm kind of asking the same question again. When you're saying best-in-class margin for Cobra. Are you taking VINCI Energy as sort of a reference point? Or do you think you should have a higher margin given the EPC risk that you're taking on part of the business? Thank you.
Xavier Huillard: Thank you. I'll go through those in order. Now, I didn't say the 10%. It's a high single digit. There's a slight difference. Next, let me say that we're talking about project IRRs. It's difficult to turn this into equity IRRs, because leverage very much depends on technology you're using and also depends on how you intend to sell your power. For instance, if you're talking about the Ecuador deal with a predetermined sale price to local electricity distributors, well, then you got all the terms of the equation and you can have a substantial leverage, because your proceeds your revenues are pretty much secure. On the other hand, as is the case generally in Spain now, if you're talking about merchant in other words, you're expected to sell your power in the overall marketplace. In our phraseology you got -- we call traffic risk. So capital requirements here are greater and therefore leverage is lower. That's why my rationale was only in terms of project IRR when I mentioned earlier. Third question I didn't write down. Sorry, I didn't -- I have forgotten it. Can you remind me?
Christian Labeyrie: Well, now I wanted to comment something, this is Christian. There are two portions of leverage. There's a project portion. In Brazil, for instance, Christophe correct if I'm mistaken. Usually, we're talking about BNDS financing. So it's a nonrecourse financing indeed. We use the VINCI Airport as well. So is that project leverage, which of course also depends on availability of nonrecourse financing in the country where you're working, plus there's leverage we didn't talk about yet. It's premature that we could conceivably also position in the company that in the future require the project. So the project equity with ACS. But that's another subject a separate one that we'll talk about in due course. We have to begin by having some projects that become part of the company before talking about the subject, but you're right to bring that up. What was the third question? I can't remember it. Was it Montpellier? Yes? Yes, the one that you wanted to add.
Xavier Huillard: Yes. It was on Montpellier. What was it about? Oh. Okay. Yes. We're not going to give Cobra margins. No further specifics about that, top of the class. You know the standards in the profession. We've got an example in-house. There are several other examples as well. We're cautious -- margin, we're not going to go to specifics. To talk about the Montpellier bypass though, Montpellier bypass, the investment €330 million compensated by a rate hike by some 1% over a four-year period starting price starting in 2023 -- starting in 2023. It's called back-to-back, no public funding neither from the government central government, nor from local government. There's no toll barrier on the small section, but it's financed by a slight extra coefficient from the remaining ASF network.
Gregor Kuglitsch:
Operator: The next question comes from the line of Tobias Woerner from Stifel. Please go ahead.
Tobias Woerner: Hi. Yes. Good morning, everybody. I hope you can hear me. The first question is, again, about Cobra, so apologies. You referred to best-in-class. We've looked at a number of sort of peers, but maybe you can spell them out that we can also cross reference them to our own, in terms of the margin potential. Kindly, I have also have second question, given the order book for Cobra in terms of book-to-bill, is this sort of a normal run rate? Or is this particularly strong at this point in time? Thank you very much.
Xavier Huillard: I'm not going to specify the Cobra margins. Everything has been said. So just take a look at how we expressed this in our press release. Now what you're calling the Cobra order book, I assume, this is mainly the pipeline of renewable energy projects. I think it's important to begin this venture with renewables energy with a good pipeline I outlined it for you over 14 gigawatts, varying degrees of maturity for the price projects. And then we have to take into account the fact that developing renewable energy is just at the beginning stages worldwide to such a degree that my personal feeling is that at least for several years there won't be green electricity available to everyone. Needs in green electricity are going to continue growing faster than our ability, everybody's ability to actually provide production capacity for generating green electricity. Why? Because there are lots of drivers for demand for green electricity. First of all portion of green electricity in the energy mix is growing. That's very much good news for all of our business lines that are involved in electricity within energy. Secondly, all the players whether you're talking about industry, corporates are trying to decarbonate their scope. And one of the ways of reducing carbon is to use green energy. It's the very essence of PPAs. Lots of people in the industry are big energy consumers and because they want to reduce carbon content, they try to secure purchases often long time purchasing agreements 10, 12 years PPA purchasing agreements so that they can be sure that they'll have access to green electricity enabling them to show a reduction in their carbon footprint, hopefully in compliance with the Paris agreements. Furthermore, you've got the development of electricity mobility, mainly light vehicles power electricity. And there are lots of ambitions in this area. By 2030, conceivably there may be – I don't remember the figure but a significant portion of the light vehicles in our geographies would be electric. Of course, these will have to be recharged. If you recharge them with fossil produced electricity that's pointless. The whole point is to recharge them with green electricity, which means even more green electricity to be sold. That's not being sold today. Another last aspect, green hydrogen, developing green hydrogen. We very much believe in this. You saw that we put together with the initiators Air Liquide, Total and ourselves, the biggest global fund to invest in green hydrogen. The strike for us should be above €10 billion in the end. The idea will be to invest in production equipment and distribution equipment of green hydrogen. This is a sign that shows the confidence we have and the fact that green hydrogen very certainly is going to develop in a big way, firstly because industry that uses hydrogen needs for the certain reasons, we mentioned five years ago, need to reduce the carbon footprint into the currently using green hydrogen they want to transform into green hydrogen. There's going to be a lot of demand for green hydrogen in the industry. In addition to that, we're convinced that green hydrogen is going to be used for what we call heavy mobility, which means first of all trucks and trains in the more distant future but this will happen before the middle of the century also airplanes, at least initially when we're talking about regional transport. To produce green hydrogen you need green electricity, otherwise it doesn't work. You can't use an electrolysis equipment with the fuel cell, if your initial hydrogen is highly carbon-based hydrogen, which is currently off of the case. So all in all, this will mean there will be a big demand for green electricity, we believe it will be hard to meet that demand through the supply, at least for a given period, a given period meaning several years even many years to come. Therefore, the pipeline we need to develop in all likelihood should be growing in future years in the various forms of technology for all those areas of technology.
Operator: The next question comes from the line of Jose Arroyas from Santander. Please go ahead.
Jose Arroyas: Hey, good morning gentlemen. I have three questions about the toll schedule for the French alter routes for this year where, I mean, I saw the announcement the company made earlier this week announcing a tariff freeze for short-haul travel. And I wanted to ask you a few questions. First of all, what is the proportion of traffic that will benefit from this measure? Is 5% or 10% a reasonable estimate? Second, why this announcement or this decision was taken in 2022 and not in 2021. For instance, when traffic was under pressure due to the pandemic. And lastly, could the foregone tariff increase for this year be recouped in the next several years? And if there could be positive price elasticity for this type of traffic? Thank you.
Xavier Huillard: Yeah, Pierre Coppey will answer.
Pierre Coppey: Well, on the VINCI Autoroute network, we have several thousand trips, which are origin destination we have five contracts and five tariff. Also what we have done is that we have applied the toll -- the pricing laws in a differentiated manner. And the result is that there is no impact on the yield of the tariff laws and we are in a contractual framework, whereby, each year we use a theoretic traffic model, which is multiplied by the toll law in order to ensure that this does not take us beyond limits of the toll law when you have the increases. So the impact on revenue of VINCI Autoroute of this particular measure differentiated application of tolls is therefore zero. Next, the impact on traffic in terms of elasticity I think, it's probably quite low. It's not significant, it's not significant. It's not a zero toll. It's simply a stabilization of the price. And just for your first comment on why we didn't do that earlier. Well, you didn't suggest it. So you should have come up with a suggestion earlier. And you will recollect that two years ago when we had the yellow vests movement in France, we set up another system, which worked quite well, whereby, we proposed toll reductions to frequent drivers as it were, which consisted in cutting tolls up to 30% for those of our customers who were using motorways for their home-to-work trips on a regular basis say for the whole week. So we innovated a little bit this year with this additional system. It worked well and it was well received in the press as well.
Xavier Huillard: Does that answer your question?
Jose Arroyas: Yes, very much. Thank you.
Xavier Huillard: We don't have any more questions neither in French nor English. We were unable to restore the connection with the French speaker who lost the connection. He's unable to restore the connection. So I suggest that we stop there.
Xavier Huillard: Well, thank you all Yes, the analyst who was -- who lost the connection. I think he's in Dubai. No? He's come back? Okay -- well okay. So I got that wrong. Well, I think he should change his -- I recommend that he changes Internet's supplier. No, I simply wanted to thank you for being here taking part. The fact that we can't see you in person is really becoming very, very difficult. And I do sincerely hope that our next results presentation will be held in person. I'm confident that that it will be. My job is to be an optimist. I'm paid for that. But I think we are in the process of emerging from this pandemic depending on the country of course. And I hope to have the very great pleasure of seeing you all in person and to share a drink with you at the next presentation. And between now and then have a very good day and of course stay in good health. Thank you all very much.