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Edited Transcript of DG.PA earnings conference call or presentation 5-Feb-20 10:00am GMT

Full Year 2019 Vinci SA Earnings Call

Rueil-Malmaison Cedex Feb 8, 2020 (Thomson StreetEvents) -- Edited Transcript of Vinci SA earnings conference call or presentation Wednesday, February 5, 2020 at 10:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Christian Labeyrie

VINCI SA - CFO & Executive VP

* Jérôme Stubler

VINCI SA - Chairman of VINCI Construction

* Nicolas Dominique Notebaert

VINCI SA - CEO of VINCI Concessions

* Xavier M. P. Huillard

VINCI SA - Chairman & CEO

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Conference Call Participants

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* Virginie Rousseau

ODDO BHF Corporate & Markets, Research Division - Analyst

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Presentation

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [1]

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Good morning to you one and all. Thank you for spending part of the morning with us in spite of the fact that some competition in the VINCI market announced results. With Christian, the customary exercise, of course, you'll have an opportunity to ask all your questions because we've got the entire executive committee with us present in the room today, including Jocelyne. She's over there. Jocelyne, our new HR Manager, who came on board exactly 3 weeks ago.

First of all, since it's always more fun this way, let's look at some pictures. This is the Salvador de Bahia Airport. Just to get you interested, wet your appetite and motivate you to go there, it's an airport. We run this one. You'll remember, we upgraded it, extended it. We raised environmental parameters in terms of waste processing, water processing in many different areas, improvements in a record time.

This was emphasized by the Brazilian authorities for that matter. President Bolsonaro was to come to the inauguration, but unfortunately, he had a slight health problem, so the Transport Minister attended the inauguration instead. That was only possible because VINCI Airport was highly mobilized on subject, of course, but also because they were supported by synergy with the Brazilian subsidiary. That's very familiar with Brazil, therefore, they cluster together with a builder from Portugal, making it possible to really hit the ground running and do the whole CapEx operation in a record time.

The second slide we look at here is an illustration of one of the components, not the only component necessarily, of the low-carbon motorway concept, which VINCI Autoroutes is rolling out now. You can see on the slide here, this is a car pool parking lot. So people can meet up in the parking lot near the motorway before then car pooling it to their destinations.

Then we have a funny picture. Interestingly, this is in Saskatchewan. It's a story about Saskatchewan, when you lose your dog, you can follow it 48 hours, you can watch it for 48 hours, because it is so flat, you can watch it walking away. It was very cold. You can see how cold it was, usually the tents and so forth. We got a speech in a language we weren't familiar with by the native American-Indian chief, had a cigarette package on hand, which was a symbol of peace, and he offered later some PPP sandals for this opening. He was also very nice with the Prime Minister of Saskatchewan. After the speeches and ribbon cutting, then took the wheel of this attractive trailer truck you see at the front here, and he actually drove that truck himself. Try to imagine that happening here. He led the procession that way.

Next, an illustration of VINCI Energies' involvement in areas producing renewable energy. This is solar energy here for Singapore. It's an interesting picture.

This new -- an innovation, next picture here, innovation by Eurovia. It's a robot on automated autonomous vehicle that can, therefore, very safely do horizontal markings. So road marking on motorway or highway intersections.

The next slide here. This picture, I hope is meaningful to you. This is the end of the civil engineering work of the amazing ITER project in France. Very much international finance -- internationally financed. Yes, this is the first stage in a very ambitious program designed to develop energy from nuclear fusion, which would be unearthed to reproduce the mechanism that's taking place on the face of the sun. This project, ITER, should begin producing, generating power in 2025-ish. If all works out, it would run for around 10 years, then that perfect the first series, more industrial-type series of facility using the technique based on Einstein's E = mc2. And the first series then could come online midway through the century, this century. If this works out, what you've seen in laboratory observations, then it would mean mankind would have energy available to it that would be almost limitless using fusion, which means transforming material into energy.

It's colossal, it's amazing. It's happening in France. It's an international cooperation. It's a real first in this area. There are tens of billions involved here. We're working together with other European businesses here, and we've been involved in the civil engineering for this flagship project that we'll be hearing about in the upcoming decades.

Another beautiful example here of VINCI Immobilier's know-how. This is a project near the La Defense ring road. It's a building that we bought and we completely restructured, refurbished it of the revamp to the energy facilities here, and then we sold it.

So those are just a few illustrations of things we worked on in 2019. 2019 was a good year, a very good year in fact. First of all, we saw solid growth. We'll go into some detail. Growth in business and in order intake, that gives us a good visibility at the beginning of 2020. We had good motorway traffic come back to the point, still very good, airport traffic as well.

All this leads to the following slide. Operating income and net income, which are up strongly, and this is very good news in recent weeks of fiscal '19. Excellent free cash flow up by around EUR 1 billion compared to what we saw in free cash flow in 2018. Christian, of course, will come back to the point in greater detail as well as comment on the other figures.

But beyond these economic results, we have to emphasize the major work that was done in all of our divisions and business lines throughout 2019, enabling us a few weeks ago to take the commitment to reduce by 40% our CO2 emissions, our scopes. We're in control Scopes 1 and 2. CO2 emissions, we'll be cutting by 40% by 2030, which brings us right in line with cop21, which means the trajectory whereby can reduce the increase of the temperature by the end of the century by under 2 degrees.

All of our geographies are seeing growth that's fairly infrequent. You see Europe is doing well, especially France. France is almost all organic growth, so boosted in France by activities in the region around Paris and the Greater Paris project, plus all the other property operations, more or less, anchored to Greater Paris. But also, we'd say that, once again, we have a large number of towers, office towers being built and some being completed, particularly in the La Defense neighborhood.

Another highlight, strong growth in North America. Of course, this is the full year effect of acquisitions that we made in 2018, especially VINCI Energies, PrimeLine and Eurovia, taking over activities from Plants & Paving the Lane construction company.

Something we said to you a year ago, we could tell Africa was very much resuming growth. We saw this in order intakes in 2018. This is further confirmed. Activity on African continent, up 20 -- almost 20% in 2019. Further detail, French motorways, heavy vehicle traffic resumed well in the last few weeks of the year. To some degree, this is expected, but some of it unexpected, but had been expected. We knew that the baseline effect from December 2018 was extremely low because there had been some social unrest that took place back then. You can recall throughout the country, particularly in the motorway networks, it's something that was less expected was the carryover effect due to the railway strikes that led more traffic, more users to the motorways than we'd expected.

So all in all, this is why we were able to come out with a good 2019, say, 2019, so to speak, but also with some other parameters that impacted, bad weather and then the heatwave and so forth. For many different reasons, up until the very last weeks of 2019, the year hadn't been on the trajectory of growth of 2.8%.

Another highlight of VINCI Autoroutes, work on the Strasbourg bypass, which is going forward at pace. Also explaining why VINCI Autoroutes' CapEx for 2019 reaching EUR 800 million, this includes the CapEx for this major infrastructure, this Strasbourg bypass, which should be completed during 2021. And then more daily Concessions, VINCI Autoroute, a lot of work are being done to prepare for new usage, further infrastructure for that usage, such as autonomous mobility, connected and shared mobility, also infrastructures that are fostering carpooling, I alluded to that earlier, plus working on developing AI basis and digital services such as the U-Lease concept that you all have on your iPhones, such as the automotive comparator or the mobility assistance.

VINCI Autoroutes also launched a new concept, which is [ABC] low-carbon motorway. The idea is to reduce the impact of the motorway, for instance, by using separate carpool lanes and transport lanes and also by developing a whole offer of noncarbon recharging stations throughout the highway network. By way of illustration, currently, we have around 250 recharging stations throughout our VINCI Autoroutes network. Very quickly, we ramped up to 400 recharging stations. This will mean, if you calculate this, there'll be recharging station for electric vehicles, approximately every -- some 80 kilometers, and this will help motivate people to actually using electric vehicles to decide whether it's cost-effective for them to buy an electric vehicle. They will know they'll be able to travel through the country and find a recharge station whenever they need one, especially for using the VINCI Autoroute motorway system. This will also mean we'll be able to produce our own electricity carbon-free for the fueling of these stations. So we have programs and projects to roll out, solar panels to the various unused motorway spaces. This is land next to our motorway networks, but it's not actually used as such for lanes, and we can therefore place other things on that land, such as installing facilities for renewable energy.

VINCI Airports continues to be dynamic about going through all the percentages of growth. Just a couple of figures, nonetheless, 6.9% growth in Portugal. In Portugal, we manage 60 million passengers, 8% in France, driven by good performance in Lyon and Nantes; 5.7% growth in Chile, that's good; over 7% growth in Japan. We are managing via our airport platform there, 50 million passengers in Japan, 9.2% growth in Belgrade. That's good news. You'll remember that had been an airport we took over very recently.

It's always great from the very start to see strong traffic growth driven, of course, by our proactiveness in developing some new routes and so forth. All in all, last year, we'll have managed 255 million passengers on all of our airports, which means that we're the #1 airport operator. No doubt about it. We're the most diversified one, with 45 airports located in 12 different countries. Furthermore, we've been very active with VINCI Airports to develop new routes. Last year, we opened 325 new routes, origins and destinations.

Yes, this is one thing that's distinctive at VINCI Airports versus other similar players. We're highly proactive to develop new air routes, where -- we know the airlines very well. And very interesting thing, out of the 325 new routes, 61 of them are long-haul routes, such as Osaka-London and Santiago-Barcelona that are very interesting for many different reasons.

Managed revenue, which means taking 100% of the airports where we are in control or joint control with some partners, so managed revenue of VINCI Airports, EUR 4.9 billion. This is an important figure. You have to compare this with the figure of VINCI Autoroutes, EUR 5.6 billion on the previous slide. So we're not quite there yet, but slowly but surely, the proportion of VINCI Airports in terms of volumes managed starts to be comparable to the proportion we have in Airports.

Now we've seen a big increase in the figures, EUR 2.6 billion for consolidated revenue. We see the impact of various things in recent years, such as the AWW Airport groups in the portfolio, Belgrade, plus, of course, Gatwick, which is a big chunk of the increase in revenue there. So VINCI Airports continues to roll out its investments in innovation policy for all the stakeholders. There's also passengers, an improved passenger experience and ease of transiting through airports. Also focusing on airlines, helping to be more productive and efficient, also focusing on local governments and territories. That's also distinctive for us. We've got the true ability to work hand-in-hand as partners with all the various governments, local governments through various arrangements such as in Lyon, where we're also fortunate to have various local governments that are at our side jointly investing in capital.

Now other Concessions, mainly VINCI Railways and VINCI Highways. So other Concessions continue developing well. For instance, growth of 6% in traffic. This is basically our assets in Greece, a strong growth in Lima, Peru, thanks to the opening of Section 2 of our motorway -- urban motorway concession. Also growth, 8% growth, very interesting here, the first section of the Moscow-St. Petersburg. It was opened a few years ago with a traffic risk initially. The start-up was a little bit difficult but now is on track. And as you also know, we opened Section 7 and 8 (inaudible) terminals near St. Petersburg's side opened by President Putin a few weeks ago.

Another highlight, confirmation of the success of our high-speed line. There had been a traffic risk there, the high-speed rail line SCA. We fund the wager there. This is the second high-speed rail line that's most used in France. Last year, we'll have carried around 20 million passengers on that line.

Now to look more specifically and quickly at Contracting business, starting with VINCI Energy. VINCI Energy gave us a record year, solid organic growth, 6.5% in France, 4.7% outside of France. All in all, since the full year effect of acquisitions, fairly numerous made in 2018, among others, the PrimeLine deal in the United States, plus the beginning of effects from the 34 small and medium-sized acquisitions carried out in 2019, which aren't always reflected for the full year 2019. Nevertheless, they brought in extra revenue in order of EUR 300 million extra that should continue in 2020 for the full year effect. So no major operations such as we may have had in the last, last year, but a large quantity of what we call bolt-on acquisitions. VINCI Energy has been doing this type of acquisition for a few years now. An important highlight, renewed -- continuing growth in operating margin. VINCI Energy now going beyond 6% EBIT margin. Another important point, international share of VINCI Energy. International business is 55% now versus 45% French activity. 2020 is looking good when we look at the quality and quantity of deals won in 2019 that will be carried out in 2020.

Now the clear point of VINCI Energy is very fortunate to be well positioned in the 2 major areas, i.e., the digital revolution and energy transition. These are the main drivers for the virtuous growth of VINCI Energy. In a 10-year period, we'll have basically seen a threefold increase in the size of VINCI Energy, and we're convinced that things aren't over with yet.

Eurovia, wonderful performance, 58.5% organic growth in France. We'd expect that this -- we didn't expect to be quite this strong. We see the pre municipal elections and the run-up period, this is the usual effect. Regarding top line and revenue, it's the full year effect of acquisitions made in 2018, specifically TNT in Canada as well as the Plants & Paving division from Lane construction that I already mentioned earlier. Virtuous growth, because, at the same time, Eurovia is improving its EBIT margin now going well beyond the 4% mark.

Eurovia continues to develop internationally. 46% of its activity is international, the remainder, France. Like VINCI Energy, it had such good order intake in 2019 that we can feel 2020 should also be a very good year in France. Our thinking is it'd be a great thing if things were flat just after the municipal elections. Usually, there's a sort of a downtick after municipal elections. The downtick this time shouldn't be substantial as in previous election cycles. We think that things should remain fairly flat in France in 2020, which would be a good thing. Internationally, we'll continue to see growth. My feeling, I'll talk about at the end of my talk, our feeling is that, yes, we'll continue to grow but, of course, not at the same growth rates -- tangible growth rates as we had in 2019.

VINCI Construction now. VINCI Construction also saw dynamic activity with good organic growth. We can see it on the slide. The strength, among other things, is supported by a ramp-up of the Paris region job sites, especially, not only, but especially thanks to the Grand Paris Express.

Also very good activity in Central Europe, in the U.K., in Asia, Oceania and especially in Africa. I touched upon this earlier. Africa were there, it's resumed growth. Our Grands Projets division, you remember, it was sort of in a trough last year. We've seen the completion of some major deals without having really secured new major deals that we have. We've secured, we've won some new great contracts in the U.S., in Canada, in New Zealand, in United Kingdom, which leads us to believe the Grands Projets division will resume growth in the next few months and years.

Watchpoint continues to be the same one. Oil and gas activity, oil is still very depressed, not much CapEx available in the oil market, much, much less than in previous years. Things are going fairly well-ish in gas. They do. We won some pipeline deals in gas and liquefied natural gas, 1 in Canada, and also deal -- 2 new cryogenic reservoir tanks, NOVATEK. A year from here, we'd already built 4 cryogenic tanks built on permafrost, so negotiated directly to NOVATEK, the client, for 2 additional tanks, which will be a good thing in Entrepose Contracting. But Entrepose Contracting is in a fragile state for well-known reasons that have been discussed for quite some time.

The overall market is very depressed. This is one of the explanations for the slight dip in our operating income for the entire Construction division in 2019. The harvest of order intake, VINCI Construction 2019 was very good, very good indeed. So we're confident in activity for 2020.

Two things to keep an eye on. First of all, activity in France. We want to make sure we're very aware of this. There are 2 main regions in France. The main types of regions though that are sort of overheating and then other regions that are still lacking to some degree, so we mustn't just gauge France via the prism of the Greater Paris region. In the other regions, activities are somewhat fragile, and they have to be right-sized to take account of the local market. That's the first watchpoint. Second thing to keep an eye on was continue working to improve our margins further in VINCI Construction.

Now let's talk about property, VINCI Immobilier. A very good year, VINCI Immobilier. A year ago, I probably said that our thinking was we reached a peak in terms of reservations and sales of housing, and the things would start to go down slightly. There was no dip. We're basically at the same level of reservations and sales as in 2018. This is because for 20 -- housing needs remain high in France. Furthermore, we're seeing continued low interest rates. Therefore, a lot of people sometimes have problems on the stock exchange. They decide to invest in property. Good activity as well if we look at business property, offices and hotels, especially in Paris, let's focus things there, but also other major cities such as Lyon. Lastly, we talked about this probably already. Lastly, Immobilier finalized in January 2019 the first stage in acquisition of the company called Urbat, which will position us in the south of the country and also in a segment of property development, which includes controlled housing units, the controlled price housing units.

And as I hand over to Christian now.

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Christian Labeyrie, VINCI SA - CFO & Executive VP [2]

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Well, good morning to you all. So revenues, we said, topped the EUR 48 billion mark in 2019, that's a 10% increase, of which 5% in organic growth. It's the highest organic growth rate that we've achieved these past years. The last time dates back to 2011, it reached 6.4%. It's to the same order on the slide between Concessions and Contracting.

M&A, not talking, leaving aside VINCI real estate, up 20%, which is a consequence of apartment sales these past few years. There's a lag between the booking and the delivery of these apartments. M&A, EUR 2 billion, give or take, additional revenue. That's about EUR 400 million the impact in 2019 of M&A in 2018, PrimeLine, Wah Loon, VINCI Energy, Belgrade, AWW and some acquisitions by Eurovia, the first 2 in airports here. 1.7 of the M&A deals in 2019 include a deal by Eurovia in the U.S., 2019 that overlain for some EUR 600 million additional revenue; Gatwick, EUR 700 million consolidated since May 13 last year; and some 30 deals at VINCI Energy for revenue on the year of about EUR 300 million. Full year, Gatwick would have been close to EUR 1 billion; and acquisitions by VINCI Energy, about additional EUR 800 million. We'll have those impacts going into 2020.

ForEx, slightly positive, a result of a slight decrease of the euro versus major currencies, U.S. dollar, Canadian dollar, Swiss franc or sterling.

By geography, France, as you can see, growth was essentially organic, 6.1% out of a total of 6.2%. Very good formation finish of all our units: VINCI Airport, 8.8%; VINCI Energy, plus 6.6%; VINCI Autoroute, plus 4.4%; VINCI Construction, 4.6%; VINCI real estate, up 19.3%; international, plus 16%. M&A accounts for over 10%, thanks to deals cited a moment ago. If we look by country, countries that grew the most in '19 are Belgium, Portugal, Czech Republic, Sweden, and Grand International, the U.S., Canada, Africa, Australia, New Zealand. So the share of France, in this context, in spite of sustained activity shrinks year after year, was slightly below 55% in '19 and moving back to 50%. It's a consequence of proactive expansion policy internationally needs to be flagged. Outside Europe, we now achieve 18% of our revenues, again, 16% in 2018. That's EUR 8.6 billion, no mean feat, an EUR 8.6 billion. EUR 2.2 billion achieved in the U.S., our third largest international country after U.K.; and Germany topping EUR 3 billion; and Canada, with EUR 1 billion.

EBIT, it's up but close on 15%. That's a margin of 11.9% as against 11.5% last year. Let me say, because the question was, but IFRS 16 barely impacts these numbers, these trends. So the group's performance is remarkable. Almost all business lines have improved their contribution. It's the case for Concessions, EUR 560 million, up 16%; Contracting, EUR 181 million, up 12% in Concessions. The growth comes from VINCI Autoroutes, up EUR 280 million; VINCI Airports, up EUR 327 million. The VINCI Autoroutes, the increase reflects the increase in revenue on track to good cost control, favorable baseline effect with industrial action at the end of '18. And in insurance, indemnity, I mentioned this when we disclosed the quarterlies that we obtained to partially offset the impact of the Yellow Vest.

VINCI Airports, the increase in corporate Gatwick for some EUR 270 million, the consequence of the traffic increase in Portugal and France. Margin rate of VINCI Airport dipped slightly, but that's fully due to the different mix because every airport has its own specific features and given applicable regulation margin rates vary from one airport to another, from country to country. Particularly, Gatwick has a margin rate of 38.3% in '19, slightly below the previous rate of VINCI Airports. That doesn't incorporate value creation expected across the various airports.

Contracting VINCI Energy in [Serbia] top 6%. That's an improvement if we calculate it down to [EUR 0.01]. At 25 bp shows the ability of VINCI Energy to boost its profitability, not just in its historic units, but, and that answers comments made by some of you, its ability to successfully integrate in France and overseas, new acquisitions. And furthermore, we had some M&A at VINCI Energy at EBIT rates above 6%, not to mention the value creation potential. Eurovia margin improvement exceeds 4.2%, placing the unit at the high end of the industry, improved performance in France, Europe and in America.

The integration of Lane Plants & Paving is going very well. In the U.S., we now achieved over EUR 1 billion in revenue on the West Coast for Eurovia, making it one of the leaders in the area. America accounts 17% of Eurovia in 2019 as against 11% previously.

VINCI Construction, slight dip in the margin. I mean say, immediately, I mean you probably doubt this that this dip was far more marginally H1, so it recovered well going into H2. Most of the units are posting good performance with the exception, as Xavier said, of oil and gas of Entrepose. But we've seen that it's set to recover in terms of its order book. We've brought some fine orders in.

And good performance in the U.K. Margin exceeds 2%, one of the best performance, given the characteristics of the market over there. 3% -- Soletanche Freyssinet, up 4.4%; major projects, around 3%. We're at a low point, and that's going to correct soon with the new deals coming in. Only VINCI Construction France remains rather disappointing, below 2%. But if we compare the 2 halves, the derivative is now positive, and we hope that VCF will improve its contribution in 2020. All in all, the unit's on the right track in retrieving its economic performance, and efforts undertaken should pay off as of this year.

Decrease in the margin of VINCI Real Estate at 6% is due to the fact the scarcity of land in France. It's getting difficult to find land. That's a raw material real estate where, at the same time, workers' costs tend to rise.

Next slide gives you the income statement starting with recurring operating income, where we see the impact of IFRS. So 2 share-based payments reflecting the accounts, the impact of the incentive plans for our employees, share-based payments, the performance shares or the savings plan. I think Xavier will speak to that in a moment. We did a special transaction in December, paying a top-up of EUR 400 million to all our employees so they become shareholders. They're all VINCI shareholders. That was EUR 400 million. That accounts for part of the gap between the 2 years. We also need to mention in the positive, the upside for the contribution of our equity-accounted affiliates has increased in Japan, Kansai and Qatar. We booked some provisions last year, which didn't prove necessary once again this year. And the nonrecurring items or various bits and pieces, nothing major, some goodwill impairments, but also some losses on disposals, but also some capital gains. Last year, we had some upside. We don't -- we had a positive impact to one-off on the reconsolidation of Gefyra Litourgia of the bridge in Greece.

Now the financials that I still don't see on my screen, I hope you've got them. So the financial, it's been EUR 180 million, half is due to the increase in net financial expense. This increase in net financial expenses, of course, is due to our M&A deals that need to be financed and we incorporate in our numbers. Those are the targets, the case for Gatwick has a debt of some GBP 4 billion and Belgrade airport. So if we add all these effects, it weighs on financial expense. Fortunately, we're able to optimize the cost of debt. And euro continued to decline in '19 through the various bond issues, more about that in a moment. 1.7% down to 1.3% on a weighted average basis, and we have fewer financial expenses, capitalized on our current investments because the second section of the Lima Autoroute was delivered last year. So we don't capitalize the financial expense on that investment. We still do it on the Strasbourg ring road, purely noncash on discounting provisions. When rates decrease, provisions must be adjusted, and that's an expense in the P&L.

Next, tax expense. Taxes up from EUR 1.4 billion to EUR 1.6 billion, that's as it should be, given the hike in the bottom line. The rate has increased from 32% to 33.8%, primarily due to the fact that in '18, we benefited still from the tax credit, the competitive and labor tax credit. So tax credit is nontaxable by definition, and the CIC was replaced with the same amount by a reduction of payroll taxes on low wages, which is subject to tax. So there's some increase, both in the amount, the tax rate stemming from that all in. It's worth stating, we sometimes tend to forget this, VINCI pays in France on the corporate tax, EUR 1.2 billion, to which we must add about the same amount in various taxes that are included in EBIT, giving us about EUR 2.3 billion in taxes paid by VINCI. We could add VAT on our French activities, EUR 5.3 billion. And payroll taxes, that's about EUR 8 billion that VINCI contributes to the economy and the finances of the French state.

Net income, close to EUR 3.3 billion. That's an increase of some 9% to be found fully in the EPS because we eliminated all dilution by buying shares on the par with those that we create. So it's a year, I think, that's pretty commendable, if not very good.

Let's look at the free cash flow. This chart that you all know explains the variation in the financial debt year-on-year, up EUR 6.1 billion. The highlight this year is the level of free cash flow defined as being EBITDA corrected for changes in working capital requirement, current provisions. So financial expenses, tax, CapEx, be they current or noncurrent, for the first time, we exceed the EUR 4 billion mark. Last year, I think we were at EUR 3.2 billion. So EUR 1 billion free cash flow over and above last year, which was beyond what we'd expected.

So EBITDA, EUR 8.5 million (sic) [EUR 8.5 billion], there's a star missing on the slide, because we put a star next to CapEx, not next to EBITDA. In EUR 8.5 million (sic) EUR 8.5 billion , there's an IFRS 16, the integration of leases in our accounts. We increased EBITDA, and we have CapEx that offset that hike to the tune of EUR 575 million. If we correct that effect, the increase of EBITDA is close to 15% versus last year. And if we correct still further the Gatwick impact -- integration of Gatwick in this figure, we have an EBITDA increase close on 10%, which is pretty good with an EBITDA excluding IFRS 16 that comes at 16.5% on revenue. 2/3 of EBITDA generated by Concessions, that's EUR 5.8 billion: VINCI Autoroute, EUR 4.2 billion; VINCI Airport, EUR 1.5 billion; and other Concessions, just under EUR 200 million. Contracting and real estate contribute over EUR 2.5 billion group EBITDA: VINCI Energy, EUR 1.1 billion; and VINCI Construction, close on EUR 700 million each. Other good news is the change in working capital requirement, including current provisions, which is income of over EUR 400 million, whereas last year, we spent -- and so that's an improvement of the year from EUR 700 million. So improvement to be found above all in Contracting. Contracting, approved WCR by almost EUR 900 million whereas Concessions, essentially, real estate, posted a decrease. So real estate, major land acquisitions undertaken in '19 at the end of the year, we bought a building for EUR 100 million, a building that we revamped and that we're going to resell immediately.

Taxes, financial expenses, up for the -- what's disbursed by EUR 300 million. In January 2018, we cashed in EUR 120 million under the partial reimbursement of the tax on dividends. We received part in '17, the balance in 2019. The figure was flat in '18. That contributes to the gap, EUR 300 million CapEx, EUR 2.9 billion. But if for leases, actually, EUR 2.3 billion, up by EUR 350 million on that EUR 350 million increase. Half stems from the integration of Gatwick CapEx. Gatwick's not a concession but full ownership. The Gatwick CapEx fall under that item.

Investments by Concessions, close on EUR 1.1 billion, EUR 800 million for VINCI Highways. The Strasbourg ring road for over EUR 200 million. The VINCI Airport is primarily in Brazil, mentioned by Xavier, the new Salvador terminal; EUR 40 million in Cambodia; EUR 40 million in Portugal. So free cash flow, EUR 4.2 billion, EUR 1 billion more than last year.

Next, increase of free cash flow: EUR 1 billion. VINCI Energy, EUR 300 million; VINCI Concessions, EUR 360 million; good formation finish explaining the increase in free cash flow. New acquisitions, EUR 7.7 billion, Gatwick out of EUR 8.3 billion. The balance actually deals by VINCI Energy that I mentioned earlier. And then dividend, not much to add. Share buybacks, I mentioned those, all that leading to debt, up less than expected at EUR 21.7 billion.

Next slide, we compare the net income group share with free cash flow. We can talk about the way of doing crunching the numbers. Not everyone does the same calculation. Here, we've done it the same way over the past 5 years to show the trend, good trend for the past 3 years and way above the 100% market.

Next slide, balance sheet. So obviously, major developments in 2019 reflected in capital employed, pure coincidence. So the number top being EUR 50 billion as against EUR 38.3 million last year, with a major impact by Gatwick, but also other investments made by Concessions. Units equity, up by EUR 3 billion. And debt, as we saw, up 6%. It's the split between debt of EUR 23 billion, up EUR 7.2 billion and managed cash at 6 point -- at EUR 1.4 billion up over last year. And the EUR 6.8 billion, EUR 4.2 billion are managed centrally at the holding company. And there was cash-in, in foreign affiliates at the end of December. They weren't pushed up to the holdings. So the case at VINCI SA holding topped the EUR 4.2 billion mark.

Next slide, financial policy. We're extremely active in '19, the first part of the year, on the bond market, raising EUR 4.6 billion new debt; average maturity of 12 years, longer than what we did previously; average cost barely above 2% after hedging. So these funds benefited from very favorable market context facilitated by our credit rating shown on the left. Outlook positive at S&P. One day, they may decide to upgrade it. The upgraders will see. At the same time, we reimbursed long-standing loans costing us far more EUR 1.5 billion at 5%.

Next, optimization of average cost of debt. We managed to reduce it year after year. This year, it's not quite the case, but almost in spite of the fact that on the one hand, we had to go into debt in currency for our M&A deals in the U.S. and the U.K. But we integrated the cost of debt of our targets, notably that of Gatwick. Gatwick was already borrowing GBP 4 billion at a cost that was markedly higher than which VINCI can access the -- that's reflected in the charts below, because until the 2018, the bulk of our debt was in euros. It's now only less than 60% in euros. Obviously, euro is the cheapest. Other currencies cost more. In spite of that, we have a cost of debt that remains pretty almost flat.

And lastly, to end, fixed rates, floating variable rates or whatever has the explanation I give you every time. This is how we've been able to drive down our cost of debt year-after-year. We keep some of our gross debt at floating rate. It's a little less marked at the end of '19 than previously. It's partly due to the fact that we set part of our debt at 1-year debt. So in fact, it's a fixed floating short-term fixed rate, but we stick to the principle that we said that part of our debt that matches our cash surplus is because that invested short term. We also tried to have that floating rate, the equivalent of a year's EBITDA. That's how we arrive at these charts, which, over time, have proved to be a good strategy even if we challenge it. Nothing set in stone, and we rediscuss it regularly amongst ourselves with the financial teams.

Thank you.

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [3]

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Yes, that's good. Let me just wrap up and talk to you briefly about corporate, social and environmental responsibility. 2020 in contracting, if you look at the order book, and we'll see here it's also not customary fairly unusual. Increase in the order book by 10%, that's thanks to 2019 harvest of order intake. This is true in all of our business lines, and it's also true in all of our geographies. Everything up. It's not like that every single year, please look at the slide again -- put the slide again, seeing the uptick everywhere. The effect of this is growth in Contracting business in 2020. Of course, growth rates won't be as strong as those observed in 2019.

In Concessions, still very oddly difficult to predict. We think motorway traffic should grow in line with economic growth, assuming there aren't further unforeseen events that could disturb that correlation between economic growth and traffic growth for motorways.

Also, growth at VINCI Airports, but the comparison base is now very high. So the growth will be less than in 2019. There's a question mark, of course, not as strong for us as for others on the list, there is a question mark. Necessarily, there will -- sort of be an impact. I'm thinking of the impacts of the coronavirus. Briefly, to come in on that point, if we tally up Chinese travelers that transit through our airports, we're talking about a proportion of around 5.5%. 5.5% of our 255 million passengers are going to or coming from China. It's important sizable figure, but a smallish proportion. Mainly, these travelers are transiting through Cambodia, where a large portion of Chinese travels there. And also Japan, a lot of Chinese tourists going to Japan. When I say China, I'm also including Hong Kong and Macau. Since nobody can predict how the coronavirus will evolve, so it would be early days now, too early to do any actual forecasting. For the time being, we can't quantify anything except that, in our businesses, fairly a modest impact for a couple of reasons. Firstly, we're almost not active at all in China in Contracting business. We're very -- have very, very low dependence on China in terms of sourcing materials, supplies and the airport figures I've just given you. For all these reasons, we believe that, all in all, VINCI in 2020, we should see growth in revenue again and growth in net income.

With all this data in mind, the Board of Directors met yesterday and decided to submit to the next shareholders meeting a resolution on paying a dividend of EUR 0.0305 per share. EUR 0.79 was already paid in November of 2019. You'll observe this is an increase, some 14% versus the dividend last year. And really, because the payout ratio, which generally was around 50%, have gone up slightly to reach 52.5%.

I want to make a last couple of points. We all have to get accustomed to this, and I wanted to wrap up by saying this: our economic results aren't the only thing this is about. For quite some time, we felt we have to look at overall performance, comprehensive performance. We've got this outlined in our manifesto now, which summarize -- is summarized on the slide. This is contained just to be seen in all of our offices, all our Concessions, all of our production sites in all geographies. This is a summary of what we feel is comprehensive overall performance. The good news is we're making progress in all of these areas. In the area of safety, currently, 72% of our business units did not have any accident with lost time in 2019. We've reduced, which we've done for many years now, the frequency rate, which is one way of measuring our efforts in the area of training, organization, design, enhancing job site safety. So we've made progress in safety.

We've also made progress in the diversity, especially gender diversity. Our target is in the short term, to bring up to 25% the proportion of female managers in our global geographies. The difficulty is we're starting from a very low proportion for various historical and cultural reasons and our various business plans. So it's not easy. But I just -- without going into detail, I wanted to say, we are tackling this subject in a determined fashion. We're also making progress in the area of sharing the benefits of our good performance. If you calculate everything we pay out, different products, different systems of profit sharing, different employee provisioning systems by having to undergo various collective profit-sharing system for employees and for all to take into account everything proposed to our employees via employee shareholder plan, Castor, which has been rolled out. And 90% of our employees are eligible for this globally, significant of all that, plus some additional top-up pensions for some of our employees, such as the low earners.

We end up with a figure, which is significant, i.e., EUR 470 million. We fund, one way or another, through these various arrangements to our employees. Also making progress in another area we're already well established. It's well established in our corporate culture.

Societal responsibility, we're proud that 2019 is the successful launch, and this will be an ongoing endeavor of an operation we're calling Give Me Five every year. Give Me Five enables us to welcome 5,000 youngsters, high schoolers, all of them coming from priority education areas throughout France. We focus on around 10 priority education areas in France. And in each of these areas, every year, we take 500 high schoolers, and they get a 1-week internship, a strong focus on learning where they discover what the business world's all about. They discover business lines. We show them accountants, people in communication, people in production, workers, supervisors, managers and so forth to discover often, for the very first time, these various points in the company as part of our societal responsibility to go find these youngsters, where they are in locations where they don't have a personal network and enable them to access this type of information and gain this type of experience, which will be fundamental for them to build their lives. This has been very successful. This year, we'll reach our target of 5,000 youngsters. That's an enormous figure. We're really rolling out this program for high schoolers and middle schoolers. Our target is to accommodate 5,000 of them every year. There are other components in this Give Me Five program. There's 1 chapter, which seems fairly simple, but isn't. This is the idea that we're also bringing in for summer jobs -- summertime jobs and internships. At least 20% of these interns will be coming from these priority education areas, these difficult neighborhoods. People who are studying and who live in these priority education areas are people who don't have an actual network at their fingertips. So we need to assist these people so they can come in to companies such as ours. Previously, we haven't done this. Our summer jobs and our interns came by word of mouth. But we tend to bring in people from various other areas. Now we're setting aside some of our internships and summer jobs for this specific priority education areas, this underprivileged areas.

In 2019, I mentioned this earlier, we've worked very hard on environmental topics. Three important topics here we focused on. A couple of very important worked on a great deal, pertaining to CO2 emissions, and then also the circular economy, which is a central focus for us. And then the third point is about biodiversity, water and natural environments, to focus on the environment. This is the topic you could summarize most easily. We've done an in-depth work with all of our teams. Now we can take a commitment. We stated this a few weeks ago to cut by 40% our CO2 emissions. And the scopes, we're in control of the Scopes 1 and 2. The time line here is 2030. The good news is if you just look at existing technology, today's technology, if we just set up the existing equipment that's available off-the-shelf from our suppliers today, if we implemented all of this in a very assertive way, very ambitious way between now and 2030, we've already reduced CO2 emissions by 30%. We want to go even further. So we've taken a commitment to bring it down by 40%. We're convinced that our own R&D and R&D of our suppliers and partners will enable us to reach the target of reducing CO2 emissions by 40%. Now 40% by 2030, that's so much -- that brings us to carbon-neutrality by 2050, the trajectory of cop21, which means limiting global warming by -- down to under 2 degrees by the end of the century.

The other piece of good news. Once we've achieved all of this, once these all have been done, there is actions enabling us to reach the minus 30, which are now available today off-the-shelf for our suppliers and partners. If we achieve this, we do this, the actual figures here, we're talking about significant -- gross significant CapEx, but we further discuss resources for this. Of course, there are winning lines and some losing lines, but all in all, it's win-win. This is very important. I'm convinced. The topic of the environment, we know this is gaining speed in a dizzying pace. We're going to have to be constantly thinking about global performance, overall performance. It's not just technical economic performance on one side and environmental, societal -- social performance on one side, we should have like comprehensive overall global performance or there's no performance at all.

When we talk about the environment, we won';t achieve this if it's separated from economics. So the good news in the survey we did in 2019 was that we've demonstrated that, yes, it is possible to pull together what we need, have environmental performance and economic performance going hand-in-hand, and that's not said often enough. We need to see -- there are far too many people who are convinced that saving the planet will mean negative growth. That's not true. Saving the planet will mean finding the resources to ensure that both concerns, environmental concerns and economic concerns, go together hand-in-hand or focus on at the same time. Otherwise, we've seen episodes such as the Yellow Vest. There will be social problems and unrest, and that would bring to the end our beautiful economy. So it's very important. We're talking about this more and more. It's wonderful. We think it's tremendous. This has been an extraordinary opportunity to revisit where we do things, our process and where we design things.

Now of course, we're not only focusing on the scope, we're in control of Scopes 1 and 2. But we're also very aware that due to our size and our strong presence throughout the value chain, are such that we have to play a role as a leader in this area to bring along others with us, Scope 3, upstream, our suppliers and also Scope 3 downstream.

When VINCI Autoroute rolls out networks of electric recharging stations, maybe hydrogen in the future throughout its network, Scope 3 upstream, and for energy construction develops low carbon or ultralow carbon concrete formulas. Ultralow carbon concrete means 64% CO2 emissions reduction versus usual concrete production. We use a great deal of concrete. So we are a leader in this area. We can influence others. We can speed up factoring in this requirement to reduce CO2 emissions by the concrete manufacturers and cement makers. So we've got responsibilities on Scopes 1 and 2, but the major responsibility is to be driving force on Scopes 3 and 4 up and downstream. We love this. It's very exciting. It's an opportunity to review all of our processes where we do everything. And since VINCI, for some people -- I'm joking, but since VINCI is mainly full of technical people, lots of engineers, the same as a new subject, a major subject like this one here is related to environment, we think this is a blessing. We think it's very exciting to get down to work on it. We'd like to take your questions now.

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Questions and Answers

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [1]

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So after the web, we'll do the first question as usual.

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Unidentified Analyst, [2]

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So 3 questions. First, I'd like to return to Slide 68 on the CapEx forecast for VINCI Highway. Second question on VINCI Airports. Thirdly, question on VINCI Construction France. So VINCI Construction France, it was said that the operating margin was slightly below 2%. Does that reflect an improvement over last year? Does it incorporate the claims proceeds, some sensitive job sites that were losing money? Where are we on the Greater Paris on the awards for '16 and '17?

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [3]

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'15 and '18 you mean?

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Unidentified Analyst, [4]

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On the forecast on Slide 68, as compared to the slide shown last year by VINCI during the annual result, we had motorway CapEx forecast that was slightly higher with the problems with the negotiation of the stimulus plan. VINCI Airports, ANA contributed strongly to the growth of late. We're seeing an asymptote on its EBITDA, 65%, not very different of last year. Can we expect an improvement for Portuguese airports and possibly operating come -- for VINCI for ANA?

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [5]

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You're really at the cutting-edge there. You've really -- Jean-Christophe has done his homework. On VCF, income 2019 is better than for -- than it was previous years, and it's better secured. So we're now well placed to begin to ensure it flourishes. The problems of the past are rather behind us. It doesn't mean they've all gone because in this business, there are always some. But the worst is behind us. And that's built in terms of performance and conditions that are more robust than in previous years. On the Greater Paris, Jérôme, do you want to add something on VCF, VINCI Construction in France?

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Jérôme Stubler, VINCI SA - Chairman of VINCI Construction [6]

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So on Greater Paris, there were no significant awards of construction of Greater Paris in '19. In '18 award on line [18-1], that's set to happen in the first half. We continue to respond to call for bids for segment [18-2], and we're gearing up for the subsequent segments that will be up for bid this year for which we'll get a response in '21, '22. But the first major lots of line 15 west.

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [7]

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Airports. Yes, Nicolas?

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Nicolas Dominique Notebaert, VINCI SA - CEO of VINCI Concessions [8]

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Well, briefly, as you mentioned, the EBITDA margin has risen a lot these past few years, plus the volume. There are 2 items. There's a key item, an increase in the minimum wage, a general kind of sharing of a number of growth benefits hinging on subcontracts. I mean that's not shocking. There are a number of services that are up slightly. More importantly, as you see, we're in a phase of modeling. There are also additional design, survey cost for the 2 projects, improving the capacity of the existing airport and preparing for the new airport of Montijo, which, as we saw Xavier said, was approved from the environmental standpoint and is now to be subject to the implementation of the MOU that we signed last year. It's no longer really a priority to continue this very significant growth phase, notably in Lisbon.

I didn't understand the question on the autoroutes on the highway. It says -- Mr. Huillard, did you understand the question?

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [9]

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You didn't understand it, but you try and answer it nevertheless.

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Nicolas Dominique Notebaert, VINCI SA - CEO of VINCI Concessions [10]

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No. We've just had a study group on this. We didn't actually understand this because the 3 drivers of the level of motorway CapEx, as presented last year and this year, it's the motorway stimulus plan for the Strasbourg byroad, and there are no changes, at least no reduction. So I have to find last year's paper to answer you. So it's more a paid -- the phasing of sequencing.

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [11]

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No further questions? Let's take questions over the phone.

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Operator [12]

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(Operator Instructions) First question from JPMorgan.

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [13]

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Okay. We'll finish the questions in the room.

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Unidentified Analyst, [14]

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WCR question, having a question, I'm sure you mentioned is more and more important to a bigger and bigger for U.S. With WCR first, positive flow this year. We hadn't had that in the last 3 years. I understood in construction activities, this had a positive impact on cash flow when it was growth. So 2 questions, any nonrecurring in 2019? Or was it due to previous years that have been fairly atypical? How do you view things then in 2020, in this respect?

Second question has to do with the United States. Energy, Eurovia did fairly big-sized acquisitions in the U.S. there. What about construction? Were they meaningful?

Secondly, you specified that now your size, your America coverage is fairly good in the southwest of the U.S. We talk a lot about opportunities, for instance, in Maryland. Would you consider this?

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [15]

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Remember, out of the EUR 38 billion in our Contracting business, construction makes up [EUR 15 billion]. WCR versus growth phenomenon, through the other -- another direction, usually in other business lines, which is to say part of VINCI Construction activity, particularly general contracting. It has negative WCR requirements, so non-negative or positive WCR requirement. So when they grow, generally, that improves WCR in theory. But another portion of construction and Eurovia and VINCI Energy, of course, have genuine working capital requirements. So you've got to look at -- do a fine-tuned analysis of growth.

United States now. There's no current project to do anything of significant size in the U.S. for a straightforward reason, the business of construction in the U.S. is a local business. Furthermore, it can be a fairly hazardous business. So it's not our intention to spend a great deal of money to acquire positions there. The plus would be maybe it's gaining route in a given state, but not necessarily neighboring states.

That ties in with the third question. When we respond to concession deals in the United States, we absolutely have to be able to make sure that our attracting activities can be brought into the loop facility active alone, but have to be active. It will be risky in the U.S. to be fully dependent on an outside constructor. That would problematic. When you're in a portion of the U.S., corner of the U.S., you're not necessarily deemed legitimate to be active elsewhere in the U.S., you don't necessarily have a full enough understanding of the local ecosystem of suppliers, subcontractors, the unionized, the nonunionized and so forth. The country is almost [vague] of regulations and business ecosystems that are quite different from each other.

That brings me to the third point, Eurovia strategy, [which was your] last, so correct me if mistaken.

Strategy is to really say that we win, when we're going to -- more dense the coverage. That's how we took overlaying activities. We're present in that portion of the U.S. in Southeast. So we loosen that opportunity to add to our density presence there. It's maybe counterintuitive. The temptation of a lot of people is to plant their flag over which where in the country. It's not successful in this business line. It's better to get a more dense coverage where you already exist rather than give in to the temptation to point your flag all over the country. It's not always true in all business lines. Sorry, I'm not going to go in greater detail. One, our VINCI Construction can see external growth. There's not big figures involved, and they could develop everywhere. I'm thinking of the high added value technical VINCI Construction or Soletanche-Freyssinet. Would you like to add a point? Is that okay? WFR? WCR? Microphone is on.

On working capital requirements, to answer your question, there is no nonrecurring item to point out specifically. It's just that we recovered some of the income that we'd lost, so to speak, over time in various previous fiscal periods and job sites in France, particularly. Then we got a negative impact of around -- which is developing business in activity -- developing an activity, you cross WCR but it's good WCR. Payment times take longer than it has occurred in elsewhere.

Taking some question.

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Virginie Rousseau, ODDO BHF Corporate & Markets, Research Division - Analyst [16]

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Virginie Rousseau for ODDO, I've got 3 questions. So the first 1 on Eurovia, margin growing in 2019. But it seems to me it's down in the second half versus second half of 2018. Can you explain that?

Second question, I'd like to know about the impact of China and VINCI Airports. I heard the percentage of Chinese passengers -- is it a different proportion in revenues? If you take into account the fact that Chinese spend more in retail. Our last question, payout, 52.5%. Can we consider this is now normative? Can we expect an improvement or return to 50%?

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [17]

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I'll let my colleagues respond to the first 2 points on the payout [by Christian]. We've always said that the payout rule of 50% introduced when we acquired ASF back in 2006, factored in the makeup of our business portfolio. At that time, less Concessions and more contracting than today. So as we developed Concessions business, it was natural to consider a slightly higher payout, because people who are pure players in Concessions generally have payout ratios above 50%. We're beginning to make a step forward. So normally, we shouldn't backtrack, but if we continue to successfully deploy our Concessions business, it might not be the last step we take, right, Christian?

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Christian Labeyrie, VINCI SA - CFO & Executive VP [18]

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Well, you decide. That's the explanation, right?

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Virginie Rousseau, ODDO BHF Corporate & Markets, Research Division - Analyst [19]

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Yes, I don't find your figures on Eurovia. I don't see a deterioration in EBIT in H2? And if there was 1, it has been -- I mean, there's nothing significant as of now. Eurovia, H1, generally is disrupted by weather conditions.

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [20]

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I don't see any reason. I mean, these are things that I look -- I'm a bit surprised by the question. I don't see any material reason for any lags, if only maybe possible impact of weather conditions, but then it needs to be looked at by geography because, of course, it varies.

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Christian Labeyrie, VINCI SA - CFO & Executive VP [21]

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It's not why we're talking about operating. It's up in absolute terms and in percentage. If you talk about net income, there may be other factors, goodwill impairments, disposal capital gains. But for the EBIT, it's up.

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [22]

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We'll check, look up.

So Chinese passengers, volumes, only 5.5%. In response to your question, we do calculate passengers without the -- Japan, 9 million passengers. We have a retention rate of only 40% extra. They probably spend more but in our accounts, it's less because only 40% rate and it's nonconsolidated in Cambodia. We have 4.5 million of Chinese passengers. There, the rate is 70% higher, but they spend less than the average. That's why detailed calculations are less significant, represents about 5.5%, but it's long term, good quality traffic because it grows faster than the average over the mid, long term. But one-off part of that traffic that we don't know the duration will be perhaps more impacted this year. That's just over 5% of our total traffic level.

That's where it's interesting to really look at the long-term perspective in the crisis that we're experiencing today. There'll be others before the end of the concession. What's important is to manage them with great flexibility whilst bearing in mind that once the crisis is over, things go back to normal because we have this long time horizon.

Next question?

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Unidentified Analyst, [23]

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Yes, I've got 3 quick questions. First of all, could you update us on possible negotiations? On the Notre-Dame-des-Landes, the Concessions contract. And possible compensation that you might negotiate for yourselves?

Second question. Last year, you mentioned more difficult relations with your clients with pending concession contracts and negotiating possible adjustments that would be required. I'd like to know that the relationships, have things calmed down now or are you still observing tension with clients on these subjects?

And then 1 last question, third and last question. Could you give us your feeling on changes in operating margin in all the contracting businesses in 2020?

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [24]

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Should I say -- I'll let Nicolas answer on Notre-Dame-des-Landes. I said that last year about clients -- relations with clients that maybe slightly more tense. I was thinking of contracting, if you recall, not Concessions, which you just mentioned, which isn't to say things are easy in Concessions, but that sort of segment at the time after the contracting. Let me put it this way, though, I would say things haven't really improved or worsened. It's still sort of a sporting event, and we have to be very careful in managing the contracts. We're probably not the very best in France in contract management. Some well-known competitors are a bit ahead of us. We probably need to be a little bit more clever in our contractual abilities. We're not just talking about carefully reading the contracts and making the best use of all clauses and contracts. We're talking about having excellent traceability of any and all events that necessarily impact -- disturb in some way, job site, but to keep track of everything so that we can then have reasoning. And we also need to deal with the matters as they arise and not just postpone them, brush them under the carpet, and await the end of the contract. So it's -- we're learning as we move forward and we adapt.

Margins. Well, honestly speaking, and as we saw in charge of (inaudible) energy. Do you want me to ask for another increase in margin in the short term? No. Maybe 1 day. I can see the -- made a beautiful effort, we asked him politely last year. So we'll let them have a little breathing space now. Eurovia, maybe could be pressured slightly. Production, yes. Definitely. So overall margin on VINCI Construction should go up in 2020.

Regarding Notre-Dame-des-Landes, Nicolas, briefly.

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Nicolas Dominique Notebaert, VINCI SA - CEO of VINCI Concessions [25]

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Over 9 years -- in 9 years, we've worked very hard to execute the contract. No doubt about it. The traffic went from 3 million to 7.2 million passengers. This is the strongest traffic growth in France. Got surveys showing GDP, it wasn't a direct relationship -- it wasn't a direct link with North Italy and Spain. They've been created this way. We continue cancellation at the earliest. So we ended 2021 awarding a new contract. Okay? Ongoing investments, smaller things, parking areas and so forth.

With Eurovia. We're doing the extension of the Saint-Nazaire Airport, which helps Airbus, because their XL could land there now, and as such, generates jobs as well. We're asking for dialogue now. This is the right time to have discussions to calculate compensation for cancellation under administrative law in France. This depends on the value created, the lost amount and so forth. A fairly comfort calculation, 45 years' worth of contracts that are removed from us, so discussions are possible. They're not easy discussions. Can't give a single figure, but the way we've been discussing, if to forecast growth and so forth. So we would like to be actively involved in discussion with the government on this.

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Unidentified Analyst, [26]

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Okay. (inaudible) from MF Research. I was wondering would it be possible to optimize cost of debt for Gatwick. And what might the time line be to do that?

Then I've got a second question. This has to do with the external growth. Are there geographies or business lines -- we have some knowledge already, but do you have any additional new information on possible external growth?

And then I got a last question, elections and roadways. Why in 2020 do you think there won't be much of an impact from the municipal elections versus how things are unusual, usually?

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [27]

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First of all, [Christian], Gatwick. It's a shared interest to service JP and VINCI Airports to optimize to degree possible cost of debt and optimize everything else as well. We've got a great team. I'll be meeting with others next week, such as people from the finance department. They issued, I think that for 30 years, that was in July of 2019, I don't remember the rate, but it was pretty good, under 3% for the true top professionals.

Optimization will take place because rates will tend to remain low and very low. As you refinance existing debt, we'll be able to optimize. We have joint discussions with people from Gatwick, people from central treasury. But these are highly professional people. We can optimize the acquisition debt. We've begun doing this. We'll continue to do so. That's my answer.

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Unidentified Analyst, [28]

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What about the elections question on this?

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [29]

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It's always difficult to forecast the future, but we do not expect a major drop in public works activity in France during the municipal elections year of 2020. Usually, it's countercyclical during municipal elections. Let me explain the reason. If you look at the long track record, things can fluctuate. In 2014, there was a double-digit drop. If you look back further, on average, it's less of a drop. There can be some very big drops and then some lower drops during the election years.

Now another point of election cycle, because another cycle of election, this will be a good way around. Next year will be departmental elections, and the department, as a proportion of public contract and public works is lower than had been for municipal governments, it can be an impact.

And the third point, there are some restructured current effects. Firstly, local governments have fairly good finances right now, boosted [in area] by proceeds from property taxes. Furthermore, and this is a real difference versus 2014, all these various shared structures that were being set up in 2014, shared by municipalities are up and running, twofold effect in 2014. Our clients were getting reorganize, banding together so forth, and during that period, they weren't launching projects, not many. So that's an obvious baseline effect. Furthermore, the various projects in these urban areas that are long-term projects with structures that are less sensitive to political changes, that's for various reasons involved. Plus, we're starting the year with great momentum, thanks to the order book at Eurovia, where business is very cyclical. The beginning of the year is going to be quite active. Since [there are a number of] orders on hand.

External growth, this will vary from business line, but an overall answer would be in contracting businesses, what we're convinced of is we can't just buy something because it's a beautiful company. We acquire it, if first of all, we've worked hard to get a full understanding of their corporate culture and the culture and habits of the country where we're going to buy it. So we can't just develop every which where. So every business line has some priority geographies. Those of you who have observed Eurovia, really likes Canada and the U.S. This could extend to further geographies in the future. For the time being, that's the focus, trying to get greater density of our activities in those areas of the world. Eurovia won't be going to China or elsewhere in Asia, and VINCI Energy is -- make the same point. They see the first significant development through the United States. The time line, we're in the integration process, it might take a few more years. Once that's complete, we can use PrimeLine to possibly roll out other VINCI Energy expertise in that area of the world. So we're doing this step by step. The rationale isn't exactly the same as for Concessions. Concessions, especially airports, here, our policy is study 360 degrees. We look at everything. We try to be very proactive, forward-looking, and we're able to go to many geographies, assuming these geographies are secure in terms of legal and political stability and assuming they're geographies that aren't ethically problematic.

Questions over the phone now, please.

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Operator [30]

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We have a question over the phone, please.

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Unidentified Analyst, [31]

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Yes. Okay. So it's my turn. I have 3 quick ones. Cambodia, I understand there's a new airport being built at Phnom Penh, set to be completed in 2023. Is there going to be an overlap there with your activities in Cambodia? Secondly, LAMSAC, is there a date on the dispute? And thirdly, you seem more confident on VINCI Construction margins. When you're going to hit the 4% margin for VINCI Construction?

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [32]

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Yes, Nicolas. Cambodia.

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Nicolas Dominique Notebaert, VINCI SA - CEO of VINCI Concessions [33]

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Well, Cambodia is a country where for several years now in several places, there are plans that are moving forward. They're evolving. The date that you mentioned seems very soon. Next, unfortunate, I'd say is what's happening today in Cambodia is the stoppage -- discontinuation of relations with China, difficulty to get engineers, material. So it's really not the topic of the day, Cambodia. It's really just to address the situation for an economy that remains rather weak. A shock, which at macro level, could be quite significant. We're going to help it because in the welcome at Cambodian airports we have all necessary measures, technical health to ensure the activity lasts. We don't know what's going to happen in the next few years, but there's nothing imminent or looming. And in the meantime, we're facing up to strong recent growth. We're extending the runway at [Siem Reap] with MENA and VINCI Construction networks, the airports grown over 100% last year.

On LAMSAC, it's going to be a long-term effort that to say this type of dispute that you're referring to takes time. The good news is that the contract execution continue. It's our duty as concessionaire. The second section has been put in service, so traffic is there were paying on. It's international arbitration that will take several years and for which we're obviously vigilant, and we're following the case, but no particular worries aside from it takes time, but we continue to operate as concession. On the construction margin, it's going to happen in a few years' time as an answer to your question.

Next questions over the phone.

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Operator [34]

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(foreign language) Yes, please?

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Unidentified Analyst, [35]

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My first question, if I may. On motorway traffic, you ended the year up 2.8% of group level versus PRR at plus 1.1%. Can you explain what the reasons for this outperformance versus 2020 traffic? You say that you can slow rate growth. Can we expect to have as much as the growth in France? Second question on airport traffic levels. Given the limited capacity of ANA, can we expect a major slowdown in traffic levels in 2020 at Gatwick, given the Brexit and the growth level in 2019? Can you tell us what your outlook is for 2020? Final question, can you remind the percentage of your order book going to the local government municipalities.

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Xavier M. P. Huillard, VINCI SA - Chairman & CEO [36]

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Yes, traffic versus APRR, I think we have a better baseline effect, Yellow Vest, that is at the end of 2018 and early 2019 than APRR. And so, we're benefiting from that. Contrary to the baseline effect. Secondly, it's clear the Franco Spanish trade is better than Franco-German trade and ASF is better than APRR, at least benefiting from that effect. And that's a trend going into 2020. Is that -- it's confidential, but I know they converge in line with the economic growth, barring any unforeseen event. We can say that the year is off to a good start. On airports. Yes, well, the paradox, one-off paradox of airports, not long term, is that very highly constrained airports can have strong growth rates to facilitate operational at not highly constrained, 16.6% in '19. Also, in Lisbon where we had over 7%, if I recall, and there's a good trend. We're currently investing in the existing Lisbon airport on the runway to facilitate in conjunction with the Portuguese air traffic that's also invested to optimize the number of short-term flights. I mean, there's additional capacity, new routes opening, but not the same level as a part, sometimes very high double-digit, but there's still some scope, and we're working the 3 years before the opening of the new airport to continue to optimize capacity.

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Unidentified Company Representative, [37]

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Question on the percentage of the municipality block. If I put the question to Pierre, he could perhaps ask -- respond to his question for shareholding. In your business, what's the share of VINCI Construction that comes from local government? If you could give it a figure, be what? 15% from the municipalities? Yes, a bit more 20%, I'd say. And for you, Pierre? 1/3.

So there, in summary, since you're not physically present, Eurovia municipalities, that's about 1/3 of French Eurovia business, that VCF, it represents 20% of the business of VCF. With VINCI Energy, I think it's pretty modest. So all in all, if we do the exact calculation that we never do, we'd be at best, at 15% of total contracting. That's for France. No regrets.

Time for refreshments. Thank you.