(News Bulletin 247) – The conglomerate published results slightly above expectations in the first quarter. Equans margins seem to be holding investors back.

Bouygues is more diversified than ever. Historically present in construction, telecoms and the media, the group added a new string to its bow in October, by acquiring Equans, a company specializing in multi-technical services, from Engie for just over 6 billion euros. (ventilation, heating, fire protection).

This transformative acquisition, however, left some analysts skeptical because of its price and the important work to be done for Bouygues to restore its profitability.

The first quarter results published on Tuesday by the conglomerate do not seem to reassure the market on this point. Bouygues shares fell 2.8% around 11:30 a.m., posting the largest drop in the CAC 40.

>> Access our exclusive graphic analyses, and enter into the confidence of the Trading Portfolio

Seasonality effect

“It’s surprising because the overall results are good or even better than expected. Perhaps the market is a little disappointed with Equans’ margins, which are below the annual target, but this is due to seasonality effects”, notes a financial analyst. Over the first three months of the year, current operating income from Equans activities amounted to 98 million euros, i.e. a margin corresponding to 2.2% and therefore effectively less than the target set for the current financial year, that is to say a rate comprised between 2.5% and 3%.

The company nevertheless considers that the profitability of the first quarter is “consistent” with the seasonality of the activities of Equans. The financial director, Pascal Grangé, also assured analysts that Equans was garnering more profitable orders, and that therefore the margin of its order book was on the right trend.

As a reminder, the 2023 financial year is only a first step on the way to restoring the profitability of Equans targeted by Bouygues. After 2023, the conglomerate intends to raise the profitability of Equans to nearly 4% in 2025 and then nearly 5% in 2027.

Telecoms win customers

Beyond Equans, the results of Bouygues proved to be in line with expectations. Sales increased by 46% over one year due to the integration of Equans, and by 4% on a comparable basis to reach 12 billion euros, while current operating income from activities returned to the green to 9 million euros, against a loss of 66 million euros a year earlier.

According to a consensus provided by the company, analysts expected a turnover of only 11.74 billion euros and a current operating loss of the activities of 2 million euros.

The company remains in a net loss of 134 million euros compared to 131 million euros in the first quarter of 2022, due in particular to a higher cost of debt in connection with the acquisition of Equans.

Construction activities are showing good momentum, despite the 15% drop in revenues at Bouygues Immobilier, penalized by the wait-and-see attitude of customers, whether in the commercial or residential sectors. Revenue from construction activities thus increased by 5%, while the current operating loss on activity came to 243 million euros against 233 million euros a year earlier. Colas posted a loss of 300 million euros, the group’s public works subsidiary still showing a net loss at the start of the year due to seasonal effects.

Bouygues Telecom recorded a turnover up 8% over one year to 1.94 billion euros. The operator has notably recruited 27,000 customers on its mobile plan fleet. “A good performance if we compare to the market figures which are weak”, underlines the financial analyst quoted above. Current operating profit from activities fell from 94 million euros in the first quarter of 2022 to 126 million euros a year later.

After this first quarter, Bouygues confirmed its objectives for 2023, namely at group level an expected turnover close to that of last year (54.4 billion euros) and an increase in current operating profit of activity compared to that of 2022 (which was 2.16 billion last year by integrating Equans over twelve months).