Earnings Release • Aug 26, 2020
Earnings Release
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Vélizy-Villacoublay, 26 August 2020 17:40
Revenues (1) : €6.9bn (-18.9%) Operating profit on ordinary activities: €262m (-68.7%) Net profit group share: -€8m Net debt (2) : €10.9bn (+€0.2bm over 12 months) Contracting order book: €17.1bn (+15% over 12-months)
The Board of Directors of Eiffage met on 26 August 2020 to approve the financial statements for the first half of 2020(3) .
As indicated in the financial information for the quarter ended 31 March 2020, "the growth recorded by the Group in the first two months of the year came to an end in mid-March when there was an abrupt fall in activity as a result of the measures implemented to limit the spread of the Covid-19 virus (...). This phenomenon was far more pronounced in France than internationally." Against this backdrop, consolidated revenues for the first half-year amounted to €6.9bn, down by 18.9% in actual terms and by 19.6% on a like-for-like (lfl) basis.
Contracting activity shrank by 18.7% to around €5.8bn (-18.9% lfl). Revenues amounted to €3.8bn in France (-22.1% actual and -22.2% lfl) and nearly €2.0bn abroad, down by 11.1%, of which -12.0% in Europe excl. France and -6.2% in the rest of the world. Among the main countries where the Group operates, business proved robust in the face of the pandemic in Germany (+8.9%) and Spain (-0.8%). In Belgium, in contrast, revenues contracted in similar proportions to France (-23.8%).
1 Excl. IFRIC 12.
2 Excluding IFRS16 debt and the fair value of CNA debt and of swaps.
3 The audit procedures have been performed and the limited review report on the financial statements has been issued.
The Group considers that the decline in its contracting's revenues between mid-March and the end of June, linked to Covid-19, is €1.4bn.
In the Construction division, activity was down by 27.0% at €1.47bn (-30.0% in France and -18.5% abroad). In Property Development, reservations for new housing units numbered 1,863 as against 2,534 in the first half of 2019.
In the Infrastructure division, revenues declined by 15.0% to €2.55bn. With an overall decrease of 18.4% in France, activity declined by 22.8% in Road Construction and 19.4% in Civil Engineering, while in Metal it was up by 14.1% thanks to offshore wind farms. The division posted more limited declines internationally (-8.4%, of which -11.4% in Europe excl. France).
In the Energy Systems division, activity fell by 16.1% to €1.76bn, of which -19.1% in France and -9.4% internationally, of which -6.7% in Europe excl. France.
In Concessions, revenues were down by 20% at €1.13bn, affected by the fall in motorway traffic (-30.6% for the APRR network and the A65 motorway, -40.0% for the Millau viaduct and -17.5% for the Autoroute de l'Avenir in Senegal), with business generated by the Lille and Toulouse airports also proving much weaker than expected due to a 61.5% drop in passenger traffic.
The fall in motorway and airport traffic between mid-March and the end of June, as well as the closure of the Pierre Mauroy stadium were entirely attributable to Covid-19. The impact of the Covid-19 on Concessions revenues is estimated at €0.43bn.
In the second quarter, the one most affected by the pandemic, business was down 31.4%, of which -29.9% in Contracting and -38.9% in Concessions.
The Group's operating profit on ordinary activities came to €262m, down by (-68.7%), for an operating margin of 3.8% as against 9.8% for the first half of 2019.
In Construction, the operating margin came to -2.1% (3.4% in June 2019), basically due to building in France, while margins on property and contracting in Europe held up better.
In the Infrastructure division, the margin went from -1.0% in June 2019 to -5.3% in June 2020, with activity being particularly affected in France, especially in Road Construction.
In the Energy Systems division, profitability was 1.1% (3.6% in June 2019). Activity in France showed a small profit. The Spanish, German and Dutch subsidiaries posted solid performances.
For Contracting overall, the operating margin was -2.5% and the contribution to operating profit on ordinary activities went from €115m in June 2019 to -€146m in June 2020.
This decline in operating income was mainly due to the drop in activity between mid-March and the end of June, which made it impossible to cover fixed overheads and means of production, which are not paid for by customers. During this period of under-activity, however, they were reduced to the minimum necessary to ensure the health and safety of the personnel present on the active sites and to allow a rapid restart of the works. The Group made use of the short-time working scheme during this period, mainly in France. Despite the restart of almost all the works during June, the adaptation of job posts to safeguard the health of on-site workers continues to weigh on productivity, albeit to a much lesser extent than in the second quarter.
The Group considers that the shortfall in profitability in Contracting observed in the first half of 2020 relative to the margin of the past two years (1.6%) is entirely attributable to the pandemic. This 4.1%(4) fall in the margin represents a reduction in operating profit on ordinary activities of €265m.
In Concessions, the operating margin shrank to 36.2% (51.6% in 2019), with APRR for its part posting a moderate fall in its EBITDA margin to 73.1%, compared with 76.4% in June 2019.
The fall in revenues of the motorway and of the airport concessions in France, as well as the closing of the Pierre Mauroy stadium, as a result of Covid-19, led to a decline in operating profit on ordinary activities of €350m.
The decline in operating profit on ordinary activities was also due to the significant resources that were maintained to ensure the continuity of service of the motorway and rail networks and the airport hubs, despite the falls in traffic.
Other operating income and expense resulted in a net expense of €12m compared with a net expense of €18m in June 2019. This item includes two significant amounts. On the one hand the value of the Pierre Mauroy stadium was adjusted for an impairment of €57m. As a direct consequence of Covid-19, the commercial activity of the stadium has been closed during the lockdown, due to the prohibition of assemblies in France. To date, capacity restrictions still do not allow the organisation of large events, key commercial activity target. Continuing uncertainty as to the lifting date of the limitations and associated restrictions that could follow renders the scheduling difficult. Consequently, Eiffage has made an impairment adjustment to the commercial part of this asset so as to reduce its carrying amount to the NPV of the PPP rent flows to be received. On the other hand, one-off payment of €61m was charged to Atlas Arteria, in consideration of support for the change in governance of MAF2 in parallel with the 2% increase in APRR and ADELAC. This one-off payment, which reduced the net amount paid by Eiffage in March 2020 in the context of this transaction to €150m, was recognised as income in the consolidated financial statements.
The net cost of financial debt decreased by €11m in the first half of the year, to €124m.
The net profit group share was thus -€8m (€290m profit in June 2019).
Net financial debt, excluding IFRS 16 debt and the fair value of CNA debt and of swaps, stood at €10.9bn (+0.2bn over 12 months). It takes into account the investment made in March 2020 to acquire 2% of the share capital of APRR and ADELAC, as well as the precautionary measures taken as soon as the pandemic started to preserve the Group's liquidity (in particular the cancellation of the dividend for 2019 and the limitation of the share buyback programme).
Free cash flow, traditionally negative in the first half of the year, came to -€373m as against -€135m in the first half of 2019, despite still significant investments in concessions (start of construction of the A79 motorway in Allier) and in Contracting (tunnel boring machines for the Grand Paris Express). The seasonal change in working capital requirement (€306m), substantially less pronounced than in 2019 (€518m), partly offset the fall in EBITDA.
4 Difference between +1.6 % and – 2.5 %
The Group has a solid financial structure, both at the level of Eiffage S.A. (and its Contracting subsidiaries), which have a short-term rating of F2, and its concession-holding entities, the most important of which is APRR (rated A- stable).
At 30 June 2020, Eiffage S.A. and its Contracting subsidiaries had liquidity of €4.6bn composed of €2.6bn of cash and cash equivalents and an undrawn bank line of credit without financial covenants. This facility, which was increased from €1bn to €2bn in May 2019, matures in 2025 with the possibility of a one-year extension. Liquidity was up by €0.5bn compared with the €4.1bn at 30 June 2019.
On 15 April 2020, Eiffage S.A. put in place a supplementary line of credit of €600m in the form of a securitisation bridging loan, which it cancelled on 30 June. On 16 June, Eiffage S.A. also obtained an F2 short-term credit rating from Fitch Ratings and on 26 June it carried out an inaugural unrated bond issue for €500m maturing in January 2027 with a coupon of 1.625%.
APRR for its own part had liquidity of €3.1bn at 30 June 2020, consisting of €1.1bn in cash and cash equivalents and an undrawn bank line of credit. This facility, which was increased from €1.8bn to €2bn in February 2020, matures in 2025 with the possibility of two one-year extensions. Liquidity was up by €0.3bn compared with the €2.8bn at 30 June 2019.
Additionally, in January 2020 APRR repaid all its bonds maturing in 2020 for €1bn with the completion of two bond issues of €500m each, one in January with a three-year maturity and a 0% coupon, and the other in April with a seven-year maturity and a 1.25% coupon. In April 2020, APRR also raised €400m by means of commercial paper with a one-year maturity and a negative yield. Lastly, on 17 April 2020, Standard & Poor's confirmed APRR's A- credit rating with a stable outlook.
Ms Thérèse Cornil and Mr Bruno Flichy resigned as directors effective 30 June 2020 after respectively 9 and 18 uninterrupted years on the board. The Board of Directors thanks Ms Cornil and Mr Flichy for their work and actions in supporting the Group's growth and development over the course of these years.
In its December meeting the Board will welcome a new director representing the employees in accordance with the vote of the General Meeting of 22 April 2020. This director's nomination process is under way.
In Contracting, the order book has reached a record high of €17.1bn, up by 15% year-on-year (+14% over 3 months). It represents 14.8 months of activity for the Contracting divisions. The growth in the order book (+€2.3bn) is due both to low production in the second quarter of 2020 and to the award of three major contracts in 2020 (the future A79 motorway in France, the A3 motorway in Germany and the HS2 high-speed rail line in the UK). However, taking orders for the recurring businesses will be a point for attention in the second half.
Business in the second half of the year will therefore be able to rely on a solid order book as well as a work organisation now in place to deal with the still present sanitary constraints. This organisation will have an impact, albeit limited, on the productivity of the work sites.
The Group therefore anticipates for the second half of the year:
For the year as a whole, Eiffage anticipates a marked decline in its business and results, which will however recover significantly in the second half of the year.
With an all-time record order book, a solid balance sheet and strengthened liquidity, the Group is confident of its ability to weather the current health and economic crisis and to invest in its sustainable growth.
A more detailed presentation of the accounts for the first half of 2020, in French and English, is available on the company's website, www.eiffage.com.
Investor contact Xavier Ombrédanne Tel.: + 33 (0)1 71 59 10 56 [email protected] Press contact Sophie Mairé Tel.: + 33 (0)1 71 59 10 62 [email protected]
| Changes | |||||
|---|---|---|---|---|---|
| in millions of euros | H1 2019 | H1 2020 | Actual | Like-for like (lfl) |
|
| Construction | 2,018 | 1,473 | -27.0% | -27.4% | |
| of which Property | 445 | 321 | - | - | |
| Infrastructure | 2,998 | 2,548 | -15.0% | -15.0% | |
| Energy Systems | 2,102 | 1,764 | -16.1% | -16.4% | |
| Sub-total Contracting | 7,118 | 5,785 | -18.7% | -18.9% | |
| Concessions (excl. Ifric 12) | 1,417 | 1,133 | -20.0% | -23.2% | |
| Total Group (excl. Ifric 12) | 8,535 | 6,918 | -18.9% | -19.6% | |
| Of which: | |||||
| France | 6,313 | 4,940 | -21.7% | -22.5% | |
| International | 2,222 | 1,978 | -11.0% | -11.5% | |
| of which Europe excl. France | 1,843 | 1,621 | -12.0% | -12.8% | |
| of which outside Europe | 379 | 357 | -5.8% | -5.3% | |
| Construction revenue of Concessions (Ifric 12) | 176 | 110 | n.m. |
| in millions of euros | Q2 2019 | Q2 2020 | Change |
|---|---|---|---|
| Construction | 1,095 | 666 | -39.2% |
| of which Property | 240 | 139 | - |
| Infrastructure | 1,680 | 1,293 | -23.0% |
| Energy Systems | 1,109 | 762 | -31.3% |
| Sub-total Contracting | 3,884 | 2,721 | -29.9% |
| Concessions (excl. Ifric 12) | 735 | 449 | -38.9% |
| Total Group (excl. Ifric 12) | 4,619 | 3,170 | -31.4% |
| Construction revenue of Concessions (Ifric 12) |
106 | 65 | n.s. |
| H1 2019 | H1 2020 | |||||
|---|---|---|---|---|---|---|
| millions of euros |
% of revenues |
millions of euros |
% of revenues |
Change | ||
| Construction | 69 | 3.4% | (31) | (2.1%) | ||
| Infrastructure | (29) | (1.0%) | (134) | (5.3%) | ||
| Energy Systems | 75 | 3.6% | 19 | 1.1% | ||
| Sub-total Contracting | 115 | 1.6% | (146) | (2.5%) | ||
| Concessions | 731 | 51.6% | 410 | 36.2% | ||
| Holding company | (10) | (2) | ||||
| Total Group | 836 | 9.8% | 262 | 3.8% | - 68.7% |
| in millions of euros | H1 2019 | 2019 | H1 2020 |
|---|---|---|---|
| Operating revenues | 8,869 | 18,690 | 7,136 |
| Other operating revenue | 1 | 5 | 1 |
| Raw materials and consumables used | (1,638) | (3,180) | (1,237) |
| Employee benefits expense | (1,908) | (3,800) | (1,814) |
| External charges | (3,764) | (8,103) | (3,082) |
| Taxes other than income tax | (218) | (495) | (190) |
| Depreciation and amortisation | (505) | (1,041) | (569) |
| Net additions to (releases of) provisions | (16) | (72) | (20) |
| Change in inventories of finished goods and work in progress | (41) | (77) | 12 |
| Other operating income and expense on ordinary activities | 55 | 78 | 25 |
| Operating profit | 836 | 2,005 | 262 |
| Other income (expenses) from operations | (18) | (68) | (12) |
| Operating profit/(loss) | 818 | 1,937 | 250 |
| Income from cash and cash equivalents | 7 | 18 | 6 |
| Gross cost of financial debt | (142) | (283) | (130) |
| Net cost of financial debt | (135) | (265) | (124) |
| Other financial income and expense | 3 | (12) | (11) |
| Share of profit/(loss) of equity-accounted investees | 7 | 13 | 5 |
| Tax on income | (205) | (560) | (35) |
| Net profit/(loss) | 488 | 1,113 | 85 |
| Attributable to owners of the parent | 290 | 725 | (8) |
| Attributable to non-controlling interests | 198 | 388 | 93 |
| in millions of euros | 30/06/20 | 31/12/19 | 30/06/20 |
|---|---|---|---|
| Property, plant & equipment | 1,485 | 1,817 | 1,838 |
| Right-of-use assets | 795 | 889 | 935 |
| Investment property | 3 | 62 | 60 |
| Concession intangible assets | 10,907 | 10,837 | 11,561 |
| Goodwill | 3,241 | 3,703 | 3,398 |
| Other intangible assets | 220 | 249 | 254 |
| Investments in associates | 157 | 162 | 163 |
| Non-current financial assets in respect of concession service arrangements |
1,599 | 1,585 | 1,576 |
| Other financial assets | 579 | 612 | 525 |
| Deferred tax assets | 286 | 254 | 310 |
| Total non-current assets | 19,272 | 20,170 | 20,620 |
| Inventories | 743 | 745 | 768 |
| Trade and other receivables | 6,267 | 5,467 | 4,955 |
| Current taxation | 231 | 140 | 212 |
| Current financial assets in respect of concession service arrangements |
59 | 60 | 62 |
| Other assets | 1,806 | 1,718 | 1,970 |
| Other financial assets | - | 157 | - |
| Cash & cash equivalents | 3,576 | 4,420 | 4,186 |
| Total current assets | 12,682 | 12,707 | 12,153 |
| Total assets | 31,954 | 32,877 | 32,773 |
| in millions of euros | 30/06/2019 | 31/12/2019 | 30/06/2020 |
|---|---|---|---|
| Capital | 392 | 392 | 398 |
| Consolidated Reserves | 4,272 | 4,288 | 4,922 |
| Gains and losses recognised directly in equity | (162) | (157) | (240) |
| Profit/(loss) for the year | 290 | 725 | (8) |
| Equity attributable to owners of the parent company | 4,792 | 5,248 | 5,072 |
| Non-controlling interests | 894 | 983 | 1,142 |
| Total equity | 5,686 | 6,231 | 6,214 |
| Borrowings | 10,644 | 10,698 | 11,622 |
| Lease liabilities | 573 | 642 | 695 |
| Deferred tax assets | 836 | 811 | 1,001 |
| Non-current provisions | 683 | 787 | 794 |
| Other non-current liabilities | 155 | 151 | 153 |
| Total non-current liabilities | 12,891 | 13,089 | 14,265 |
| Trade and other payables | 4,069 | 4,174 | 3,639 |
| Loans and other borrowings | 2,645 | 3,047 | 2,892 |
| Part of non-current borrowings due within one year | 1,279 | 1,304 | 900 |
| Part of lease liabilities due within one year | 204 | 230 | 216 |
| Current income tax liability | 113 | 190 | 66 |
| Current provisions | 568 | 597 | 613 |
| Other liabilities | 4,499 | 4,015 | 3,968 |
| Total current liabilities | 13,377 | 13,557 | 12,294 |
| Total liabilities and equity | 31,954 | 32,877 | 32,773 |
| in millions of euros | H1 2019 | 2019 | H1 2020 |
|---|---|---|---|
| Opening cash & cash equivalents | 3,573 | 3,573 | 4,293 |
| Effect of movements in exchange rates | 1 | 2 | (2) |
| Restated opening cash & cash equivalents | 3,574 | 3,575 | 4,291 |
| Net profit/(loss) | 488 | 1,113 | 85 |
| - Profit/(loss) of equity-accounted associates | (7) | (13) | (5) |
| - Dividends received from equity-accounted investees | 5 | 6 | 3 |
| - Depreciation and amortisation | 505 | 1,041 | 615 |
| - Net additions to provisions | 3 | 51 | 30 |
| - Other non-cash items | 25 | 43 | 18 |
| - Net gains/(losses) on disposals | (8) | (14) | (4) |
| Cash flow from operating activities before interest and taxes | 1,011 | 2,227 | 742 |
| Net interest expense | 122 | 240 | 119 |
| Interest paid | (193) | (263) | (199) |
| Income tax expense | (205) | 559 | 35 |
| Income tax paid | (340) | (542) | (287) |
| Change in working capital requirements linked to operations | (518) | 3 | (306) |
| Net cash from operating activities | 287 | 2,224 | 104 |
| in millions of euros | H1 2019 | 2019 | H1 2020 |
|---|---|---|---|
| Acquisition of intangible assets and property, plant & equipment |
(151) | (392) | (227) |
| Acquisition of intangible concession assets | (190) | (420) | (174) |
| Acquisition of non-current financial assets | (9) | (26) | (22) |
| Disposals and reductions of non-current assets | 44 | 114 | 66 |
| Net operating investments | (306) | (724) | (357) |
| Acquisition of equity interests | (31) | (553) | (22) |
| Disposal of equity interests and of assets corresponding to disposal of businesses |
- | 10 | - |
| Cash and cash equivalents of entities bought or sold | (8) | 49 | (8) |
| Net financial investments | - | (494) | (30) |
| Net cash from/(used in) investing activities | (345) | (1,218) | (387) |
| Dividends paid to shareholders | (403) | (550) | (210) |
| Capital increase | 162 | 162 | 119 |
| Acquisitions/disposals of non-controlling interests | - | - | (232) |
| Buy-backs and re-sales of own shares | (149) | (146) | (52) |
| Repayment of lease liabilities | (116) | (233) | (120) |
| Repayment of borrowings | (1,203) | (1,406) | (2,726) |
| New borrowings | 1,528 | 2,042 | 3,040 |
| Net cash from/(used in) financing activities | (181) | (131) | (181) |
| Change in other financial assets | - | (157) | 157 |
| Change in cash and cash equivalents | (239) | 718 | (307) |
| Closing cash & cash equivalents | 3,335 | 4,293 | 3,984 |
| Holding & Contracting liquidity | Concessions liquidity |
|---|---|
| APRR | |
| €2.6bn of cash | €1.1bn of cash |
| + €2bn undrawn revolving credit line | + €2bn undrawn revolving credit line |
| = €4.6bn of liquidity | = €3.1bn of liquidity |
| Holding & Contracting's net financial debt* | Concessions's net financial debt* |
|---|---|
| €2.6bn of cash | €1.1bn of cash at APRR |
| - €2.4bn of financial debt | - €9.4bn of financial debt APRR and Eiffarie |
| = €0.2bn of net treasury | + €2.8bn of net financial debt from others concessions and |
| PPP | |
| = €11.1bn financial debt from concessions | |
* excluding IFRS 16 debt, mark-to-market value of the CNA debt and the swaps
| in billions of euros | 30/06/19 | 30/06/20 | ∆ 20/19 | ∆ 3 month |
|---|---|---|---|---|
| Construction | 4.5 | 4.8 | +5% | +7% |
| Infrastructure | 6.9 | 8.4 | +21% | +21% |
| Energy Systems | 3.4 | 4.0 | +16% | +10% |
| Total for Works | 14.9 | 17.1 | +15% | +14% |
| Property Development | 0.6 | 0.7 | +9% | +4% |
| Concessions | 1.1 | 1.0 | -6% | -4% |
| Item | Definition |
|---|---|
| Construction revenue of Concessions (Ifric 12) |
Construction revenue of the concessions corresponds to the costs of carrying out the construction or upgrade of infrastructure incurred by the concession holder in application of the provisions of Ifric 12 "Service Concession Arrangements", after elimination of intra-group transactions. |
| Contracting order book | Portion of signed contracts not yet executed. |
| Net financial debt excluding IFRS 16 (lease) liabilities and fair value of debt to CNA and of swaps |
Net financial debt excluding that deriving from the application, since 1 January 2019, of IFRS 16 Leases, the fair value of the debt owed to Caisse Nationale des Autoroutes (CNA) and of derivative instruments. |
| Current operating margin | Operating profit/(loss) on ordinary activities as a percentage of revenues |
| Like-for-like or at constant | Constant consolidation scope is calculated by neutralising: |
| scope and exchange rate | the 2020 contribution made by companies consolidated for the first time in 2020; |
| the contribution made by companies consolidated for the first time in 2019 in the period of 2020 equivalent to that of 2019 which preceded their first time consolidation; |
|
| the contribution made by companies deconsolidated in 2019 in the period of 2020 equivalent to that of 2019 after they were deconsolidated; |
|
| the 2019 contribution made by companies deconsolidated in 2019. | |
| Constant exchange rate: 2019 exchange rates applied to 2020 revenues in currency. |
|
| Group Liquidity | The Group's liquidity is calculated as follows: |
| cash and cash equivalents managed by Eiffage S.A. and its Contracting subsidiaries + undrawn credit line(s) of Eiffage S.A. |
|
| APRR liquidity | APRR's liquidity is calculated as follows: |
| cash and cash equivalents managed by APRR S.A. + undrawn credit line(s) of APRR S.A. |
| Eiffage | APRR | |
|---|---|---|
| Quarterly information and revenues for the third quarter of 2020 | 04.11.2020 | 20.10.2020 |
| Quarterly information and revenues for the fourth quarter of 2020 | 24.02.2021 | N/A |
| 2020 annual results and financial analysts' meeting | 24.02.2021 | 24.02.2021 |
| Quarterly information and revenues for the first quarter of 2021 | 11.05.2021 | 20.04.2021 |
| General Meeting of Shareholders | 21.04.2021 | |
| Quarterly information and revenues for the second quarter of 2021 | 25.08.2021 | 20.07.2021 |
| 2021 half-year results and financial analysts' meeting | 25.08.2021 | |
| Quarterly information and revenues for the third quarter of 2021 | 03.11.2021 | 19.10.2021 |
| Quarterly information and revenues for the fourth quarter of 2021 | N/A | N/A |
Blackout periods start 15 days before publication of quarterly results and 30 days before publication of annual and semi-annual results.
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