- Mobile unit operating loss narrows as new customers added
- Company sees signs of stabilization in French construction
Bouygues SA shares surged after the building and media conglomerate said results at its telecommunications business improved and France’s construction market is stabilizing.
An operating loss at the telecom division narrowed and the company added more than 220,000 mobile and fixed-line users, Paris-based Bouygues said in a statement Friday. It kept financial targets for the year, including for improved overall profitability.
“The telecom unit posted another good quarter,” UBS analysts including Giovanni Montalti wrote in a note.
Shares jumped as much as 4.5 percent and were trading 2.2 percent higher at 29.53 euros at 11:37 a.m. in Paris. They have dropped by almost a fifth since the start of the year.
Bouygues is overhauling its telecom unit after talks to sell the business to France’s largest phone operator Orange SA collapsed in April. Competition among France’s leading four mobile operators remains fierce, driving prices lower and making the financing of high-speed network expansion more difficult. At the same time, Chief Executive Officer Martin Bouygues is seeking to improve construction margins to counter a slowdown in some markets.
Construction is Tough
Bouygues’ overall operating loss was 227 million euros ($257 million) in the three months through March compared with 216 million euros the previous year, according to the statement. Revenue declined 3 percent to 6.53 billion euros.
"Telecoms are improving significantly while construction remains a rather tough world," Kepler Cheuvreux analyst Josep Pujal, who has a "reduce" rating on the stock, wrote in a note.
The French construction market is seeing the “first signs of stabilization,” Bouygues said, with overall sales for the division dropping 5 percent over the quarter to 4.9 billion euros and the order book rising 3 percent to 29.9 billion euros compared to the end of last year. Contracts in France included an extension of the Calais harbor in northern France and construction of the Alto tower in the La Defense business district west of Paris.
Earnings improved at the telecom business, with a 6 percent rise to 1.1 billion euros in sales in the first quarter, as its mobile and fixed customer base grew. The current operating loss of 33 million euros was an improvement of 29 million euros, the company said. Bouygues has said it’s targeting 400 million euros in savings compared with 2013 levels, while investing as much as 800 million euros.
The number of new clients at Bouygues’s telecom business was a good surprise, Natixis analyst Gregoire Thibault said by phone, adding that the average revenue per user was disappointing.
Average revenue per mobile user was 22.4 euros a month in the first quarter, Bouygues said in today’s earnings presentation. This is the same amount as competitor Orange. That compares with SFR’s 21.8 euros in revenue per mobile user.
The telecom market "will probably remain fairly competitive," Chief Financial Officer Philippe Marien told reporters on a call. This isn’t “detrimental” to financial results, he said.
Spending on network sharing with competing carrier Numericable-SFR group as well as other planned expenses are likely to result in charges of around 270 million euros, Bouygues said, adding this could affect 2016 operating profit.
Chairman and CEO Bouygues is laying the groundwork for his succession as a son and a nephew joined the board in April. The billionaire scion of the eponymous conglomerate said he may give names as suggestions for his replacement in the coming months.