EuroBusiness Media (EBM): VINCI, a world leader in concessions and construction, recently reported first half-results. What does the rest of the year look like for VINCI ? Let’s find out. Xavier Huillard, welcome. You are the Chairman & CEO of VINCI. We’re getting to the end of the third quarter of 2013. How is the year going for VINCI?
Xavier Huillard: So far, 2013 has been a year of challenges in a difficult economic climate, but overall we did slightly better than expected. Our revenue and Ebitda increased over the first half and there was a slight contraction in our operating income and net income.
In France, business benefited from the ramp-up of the Tours–Bordeaux high-speed rail line project. Outside France, revenue growth was driven by acquisition activity, which is in line with the strategy we adopted several years ago.
Our half-year operating income was affected by the harsh weather, which penalised our roadworks business in France and also outside France. In addition, we had to provision costs incurred in Poland to deal with the strong decline in road business in that country.
Lastly, there were negative accounting impacts on income resulting from an increase in amortisation expense and financing costs following the opening of the Balbigny–Lyon section of the A89 motorway and the commissioning of the widened section of the A63.
EBM: Traffic on VINCI Autoroutes’ networks seems to have picked up in the first half of 2013. What pattern do you expect in the future?
Xavier Huillard: Yes, traffic on our motorways has returned to slight growth, and of course that’s good news.
In addition, growth of traffic on the A86 Duplex between Rueil Malmaison and Vélizy continues to be very satisfactory.
There also seems to have been an upturn in business activity in France, which could have a positive impact on HGV traffic in the coming months.
We are therefore on track for an increase in VINCI Autoroutes’ revenue and Ebitda.
EBM: What’s the current situation regarding your negotiations with the French government on the motorway stimulus package?
Xavier Huillard: Well you see, negotiations are taking their time, which I find regrettable because VINCI is ready to implement the resources rapidly in order to start the works and contribute to employment growth. We and the government have agreed the content and value of the investment programme. The sticking point is the financial arrangement whereby the cost of these works will be offset by an extension to our concession contracts.
EBM: At the end of last year, VINCI decided to acquire ANA, the concession holder for the Portuguese airports. Two questions: why invest in airport concessions and why in Portugal?
Xavier Huillard: VINCI is a world leader in the management of transport infrastructure under concession: VINCI Autoroutes operates half of France’s motorway network under concession; VINCI Park is a world leader in parking facilities; VINCI Concessions already operates a large number of bridges and tunnels in Europe and the rest of the world and, in a few years, VINCI Concessions will operate the Tours–Bordeaux high-speed rail line, the biggest project ever undertaken by the Group. Lastly, VINCI Airports is already operating a dozen or so airports that handle 10 million passengers a year.
VINCI wants to strengthen its presence in this sector, where potential growth is greater than economic growth. There are considerable needs for airport infrastructure, especially in emerging economies.
The acquisition of ANA, which operates all 10 of Portugal’s airports, including the Lisbon hub, is a perfect fit with our long-term strategy. Over 80% of ANA’s traffic (approximately 30 million passengers per year) is generated by international flights, with a special position vis-à-vis Brazil and Portuguese-speaking Africa, two promising growth areas. The 50-year concession contract offers a balanced framework that encourages performance improvement in the management of both the aeronautical and non-aeronautical aspects. Lastly, we will benefit from the support of an experienced and professional management team.
EBM: VINCI recently increased its stake in ADP from 3.3% to 8%. What end result are you looking for here?
Xavier Huillard: As you say, VINCI already owned 3.3% of ADP’s shares, and we seized the opportunity presented by the French government to increase our stake to 8%.
We will now have a Director on the company’s Board and be able to play a more active role in its development.
ADP and VINCI have complementary skill-sets which it will be possible to pool when the two companies share a common interest. That could be useful particularly in the international arena.
Against that backdrop, VINCI will be a loyal, long-term ADP shareholder and will support the company’s management.
EBM: What is the outlook for your Contracting business? What’s happening on the order book front?
Xavier Huillard: The Contracting business lines recorded good growth in the first half thanks to the progress made on the Tours–Bordeaux high-speed rail line and thanks to the good momentum outside France. VINCI Energies showed resilience and is making the best of its recent international acquisitions. Lastly, as already indicated, Eurovia suffered from the harsh weather and the decline in the Polish market, neither of which should be factors in the second half.
We expect our order intake over the full year to be at least the same as last year.
As a result, the order book at the end of 2013 should be at the same level as the previous year, i.e. about €31 billion, despite the impact of progress on the high-speed rail line.
EBM: What are your main operating objectives for the rest of the year?
Xavier Huillard: I see four priorities:
Firstly, to successfully integrate ANA within VINCI Airports after finalisation of the acquisition in the very near future;
Second, to keep moving forward on the Tours–Bordeaux high-speed line project, which should reach its peak this year and next year, with a volume of works in the order of €1.3 billion a year;
In the motorway sector, we will continue our discussions with the government with a view to trying to finalise the additional investment needed for the economic and employment stimulus plan;
Lastly, in Contracting, we have to ensure that we constantly adapt our expenses to the current realities of our markets in Europe in order to protect our margins and accelerate our growth beyond Europe.
EBM: So here we are, four months before the end of the year. How do you see VINCI’s full-year financial performance?
Xavier Huillard: The second-half 2013 performance should be close to that achieved in the second half of 2012. Over the full year, therefore, we should record slight organic growth in revenue. In addition, the decline in operating income and net income over the full year should be less pronounced than that seen in the first half.
EBM: Xavier Huillard, Chairman & CEO of VINCI, thank you very much.
Xavier Huillard: Thank you.
