(News Bulletin 247) – The conglomerate active in construction, telecoms and multi-technical services generated robust free cash flow over the whole of 2023, which enabled it to reduce its net debt.

Almost every day, a stock particularly stands out during this annual results season. A sign of the good economic health of the champions of the French Stock Exchange. And, perhaps, a drop in liquidity on the Paris market…

This Tuesday it’s Bouygues’ turn to appear on the honor roll. The conglomerate, present in construction, media, telecoms and even multi-technical services via Equans, rose 7.8% around 3 p.m., signing the largest increase in the CAC 40.

The group published 2023 turnover of 56 billion euros, up 26% year-on-year and 4% excluding scope and currency effects. Current operating income from activities stood at 2.4 billion euros compared to 2.02 billion euros in 2022. The corresponding margin reached 4.3%, down thirty basis points (0.3% ) over one year, but up sixty basis points excluding scope effects. Profit amounted to 1.04 billion euros, compared to 973 million in 2022.

>> Access our exclusive graphic analyses, and gain insight into the Trading Portfolio

The construction resists

But the “highlight” of the publication, as Morgan Stanley notes, remains the cash generation and, by extension, the group’s net debt.

Bouygues generated free cash flow of 1.179 billion euros over the whole of 2023 compared to 795 million euros in 2022, with in particular a high contribution from construction activities (708 million euros), in particular from its transport construction subsidiary Colas (469 million euros), as well as Equans (321 million euros).

This solid cash generation translates into much lower net debt than expected by analysts. Bouygues reduced its net debt to 6.25 billion euros at the end of December 2023 compared to 7.45 billion euros a year earlier. However, according to Oddo BHF, the consensus expected a net debt of 7.76 billion euros and the research office itself anticipated a figure of 7.97 billion euros.

Concerning the key points in the group’s different divisions, construction activities saw their order book increase by 4% over one year. Their turnover also increased by 4% excluding currency and scope effects. Bouygues Construction (+7% like-for-like) and Colas (+6%) recorded solid growth while Bouygues Immobilier suffered (-14%) due to the impact of high rates on the real estate market with a sharp decline demand.

Recovery of the Equans margin

The AlphaValue research firm notes that Bouygues Telecom, for its part, delivered a “solid” performance with growth in its “services” turnover (the turnover restated for roaming, terminal, insurance or even fiber installation) by 4% in the fourth quarter. “The company continues to gain market share by adding 65,000 fixed internet customers and 71,000 mobile contracts”, appreciates Oddo BHF.

Equans, a company bought from Engie in 2022 for more than 6 billion euros – a price which had raised eyebrows in the market – continues to recover its profitability.

Bouygues is committed to bringing the margin of this company closer to the best standards in its sector (we can think of Spie) with a current operating margin rate for activities expected at nearly 4% in 2025 and nearly 5% in 2027.

The group is on the right trajectory, the margin having stood at 2.9% in 2023, at the top of the target range of 2.5% to 3%. Equans’ revenues did not disappoint, with an increase of 6% on a like-for-like basis over the whole of 2023.

Stifel welcomes “good growth and margin improvement at Equans”. “We continue to think that Bouygues could present recovery potential. The stock could be supported by the dynamic earnings of Equans, the possible end of Bouygues Telecom’s cash generation difficulties and the normalization of bond yields,” develops the design office.

For 2024, Bouygues is targeting slight growth in its current operating income from activities and its turnover.