Bouygues SA (OTCPK:BOUYF) Q3 2023 Earnings Conference Call October 31, 2023 4:00 AM ET
Company Participants
Pascal Grangé – Deputy Chief Executive Officer & Chief Financial Officer
Christian Lecoq – Chief Financial Officer, Bouygues Telecom
Conference Call Participants
Nicolas Cote-Colisson – HSBC
Nick Lyall – Société Générale
Mathieu Robilliard – Barclays
Jakob Bluestone – BNP Exane
Nicolas Mora – Morgan Stanley
Mollie Witcombe – Citi
Operator
Hello and welcome to Bouygues Nine Months 2023 Results Conference Call. My name is Alicia and I will be your coordinator for today’s event. Please note this call is being recorded. [Operator Instructions]
I will now hand you over to Pascal Grange, Deputy CEO of the Group and CFO, to begin today’s conference. Thank you.
Pascal Grangé
Good morning, everyone and thank you for joining us to discuss Bouygues nine months 2023 results. With me today is Christian Lecoq, CFO of Bouygues Telecom. Following our presentation, we’ll be answering your questions.
Let’s start with our key figures, Slide 4. First, I would like — I would start by saying that in an uncertain macroeconomic environment, the group delivered a solid set of 9 month results and marked by Equans’ contribution. Group sales were up 38% year-on-year at €40.9 billion compared to nine months 2022 pro forma, including Equans, group sales were up 3%.
Group COPA increased by €383 million compared to the nine months 2022 as published and by €237 million compared to the nine months 2022 pro forma and reached €1.623 billion. Net profit attributable to the group was €665 million, a higher level compared to the previous year. Last, net debt was €10.2 billion compared to €3.7 billion at end September 2022. Restated from the impact of Equans at the acquisition date for €6.5 billion, the Free Mobile dispute for €310 million that we continue to contest and the Colas squeeze-out offer for €180 million, net debt at end September 2023 marked an improvement of €424 million compared to last year.
Let’s now turn to the review of operations on Slide 7. Let’s begin with the backlog in the construction businesses. As a reminder, from January 2023, Bouygues Energy & Services backlog is no longer included in the construction businesses’ backlog as it is now included in the Equans’ backlog. To facilitate comparison and analysis, we have highlighted in grey color the impact of Bouygues Energy & Services’ backlog in the previous year. The backlog at end of September 2023 was at a record level of €29.8 billion, up 8% year-on-year. The increase in the backlog was driven by both Bouygues Construction and Colas.
Let’s have a look at backlog for each business segment on Slide 8 which was up €2.2 billion, providing visibility on future activity as a whole. First, Bouygues Construction order intake stood at €8.1 billion in the first nine months 2023. It was driven by the award of several large contracts above €100 million internationally since the beginning of the year, of which in third quarter, 2 contracts in Hong Kong for around €400 million, 2 contracts in Switzerland for around €260 million and a contract in Croatia for around €110 million. Normal course of business remained steady during the period.
Bouygues Construction nine months backlog, excluding Bouygues Energy & Services increased by 12% to €15.1 billion. Backlog was up 18% internationally and stable in France year-on-year. Increase was driven by both international building, up 28% and civil works, up 12%.
At Bouygues Immobilier, the general market conditions remain highly challenging for both residential, commercial property markets. Volume of residential reservations remained under pressure due to fast increase in interest rates, impacting customer creditworthiness. For its part, commercial property market is at a standstill and it is, as of today, very difficult to predict the timetable for recovery.
Last, Colas’ order intake was up 8% at end September. Colas achieved a good commercial performance in the rail activities, notably with a significant order in the third quarter of a €660 million contract in Manilla for the North-South Commuter Railway line expansion. Colas’ backlog was up 8%, driven by rail up 34%. Road backlog was slightly down.
Let’s now look at the construction activities’ key figures on Slide 9. To facilitate comparison and analysis, I remind you that we have excluded Bouygues Energy & Services from the nine months 2022 figures. Sales were up 2% year-on-year and up 3% like-for-like and at constant exchange rates. First, Bouygues Construction sales were up 6% year-on-year, essentially driven by international building.
Second, at Bouygues Immobilier, sales including share of co-promotions were down 18%, reflecting the difficult market conditions of both residential and commercial property markets, as mentioned earlier. And third, at Colas, sales were up 2% year-on-year, supported by a strong performance in rail, where sales were up 7%. Roads activity kept growing by 2%, of which the EMEA was up 5%.
Current operating profit from activities of the construction businesses reached €499 million, a higher level than the first nine months 2022, resulting in a higher margin from activities at 2.5%. COPA at Bouygues Construction was very close to nine months 2022 and COPA at Bouygues Immobilier remained at breakeven during the period despite an adverse environment. Including the share of co-promotions, Bouygues Immobilier COPA stood at €21 million.
Looking at Colas, COPA was €308 million, improving by €89 million compared to nine months 2022, with margin from activities of 2.6%. This quarter margin notably benefited from the sale of some land in the U.S., leading to a strong 8.7% margin, up 1.2 points, the level of this improvement not being indicative of the full year.
Let’s now turn to the review of operations for Equans on Slide 11. As a reminder, starting from January 2023, Equans’ figures include those of Bouygues Energy & Services. The nine months 2023 period is the first period for which we have a financial basis of comparison made of Equans’ nine months 2022 figures and of Bouygues Energy & Services’ figures before elimination from Bouygues Construction. I remind you that these are unaudited figures.
Equans’ commercial activity was solid with a dynamic order intake of €13.4 billion, including the award in third quarter of medium-sized contracts, such as the renovation of a hospital complex in Belgium and the construction of a solar farm in Sweden. Equans’ backlog stood at €26 billion, stable compared to end December 2022 and offering visibility on future activity. The estimated backlog underlying margin is on the up, highlighting the ongoing positive impact of the Perform plan. Equans contribution to the group revenue represented €13.7 billion, a 6% increase versus the unaudited pro forma of €12.9 billion at end September 2022. This higher pace than expected reflects favorable market trends which don’t prevent Equans to pursue its selective approach to contracts and including the contribution of asset-based activities of which sale is underway.
Obviously, these activities won’t contribute next year. Thanks to the Perform plan, COPA was up €139 million with a 2.7% margin from activities. This performance is totally in line with our full year expectation.
Turning to Slide 12, you already know that on 18 of September 2023, Equans signed an agreement for the sale of the U.K. district’s heating and cooling network activities. Early October, Equans also signed an agreement for the sale of ATES concessions in the Netherlands. The completion of these asset disposals is expected in the fourth quarter of 2023, subject to relevant approvals. These sales were included in the Equans strategic plan and as such, will have no impact on Equans’ revenue and COPA trajectory presented at the Capital Markets Day on 23 of February 2023.
To end with Equans on Slide 13, let me just add that 2023 guidance are confirmed with Equans aiming for a slight increase in sales as a result of selective approach strategy, with COPA margin between 2.5% and 3% and a cash conversion rate before working capital requirement of between 80% and 100%. Regarding sales, we could achieve this year a higher increase in sales than what we were expecting initially. But as already explained, this integrates notably the contribution of asset-based activities that obviously won’t contribute anymore next year.
Turning to Slide 15, let’s talk briefly about TF1’s results which were released on 27 of October. First, TF1 released better results in media in third quarter than in first and second quarters. On its side, Newen was still impacted by lower programme deliveries. In the first nine months 2023, sales were down 11% and down 8% like-for-like. Q3 represented a change in the media segment with sales up 8% and up 11% on a like-for-like basis due to a scope effect related to the disposal of Unify assets. More specifically, advertising revenues were up 10% on a like-for-like basis, notably driven by the Rugby World Cup in September.
Newen Studios revenues remained down in Q3, impacted by an unfavorable basis of comparison related to major deliveries in Q3 2022 and also due to the discontinuation of activity of Salto and the end of Plus Belle La Vie for France Televisions. Thanks to better revenues in Q3 and the good monitoring in the cost of programs, margin from activities was down 0.8 points at 13.2% in the first nine months.
Turning to Slide 16, I remind you that TF1 confirmed its 2023 outlook. The TF1 group will cement its leadership position and maintain a broadly stable current operating margin from activities and it will continue to generate cash flow in order to aim for a growing or stable dividend policy over the next few years.
I now turn the call to Christian Lecoq for Bouygues Telecom’s performance.
Christian Lecoq
Thank you, Pascal and good morning to everyone. Let me start by saying that ARCEP published on 26 October, 2023 its Mobile Service Quality Survey. According to ARCEP, Bouygues Telecom was ranked second best mobile network for the 10th consecutive year across all services used by customers. In dense areas, Bouygues Telecom was ranked joint first in mobile internet. The good results obtained demonstrate once again the excellence of the Bouygues Telecom’s network in terms of voice and SMS as well as data.
Turning now to page 18, let’s begin with the commercial performance in mobile and fixed. At end September 2023, Bouygues Telecom had 15.4 million mobile customers, excluding M-to-M, thanks to 108,000 new customers in Q3 and a total of 217,000 new customers year-to-date. Bouygues Telecom also had 4.8 million fixed customers at September 2023.
FTTH continued to experience strong growth with 3.4 million customers at September 2023, of which 154,000 new customers joined us during the quarter, bringing the total number of new FTTH customers to 425,000 year-to-date. FTTH customers represented 71% of our fixed customer base, up from 61% a year ago. Last, with more than 33 million FTTH premises marketed, we are ahead of our schedule to reach our target of 35 million premises by 2026.
Let’s have a look at the key figures on Slide 19. First, we achieved 6% growth in sales billed to customers. Mobile ABPU was up €0.1 year-on-year at €19.8 and fixed ABPU was up €1.9 year-on-year at €30.9. Regarding mobile, we observed that due to inflation, some customers tend to lower their bundles. Therefore, price increases are not fully reflected in mobile ABPU. The strong performance was still partially offset by the continued decrease in incoming sales, leading to a 4% increase in sales from services. Other sales remained broadly stable over the period.
EBITDA after leases increased by €143 million compared to nine months 2022 and reached €1,451 million. Consequently, the margin increased by 2 points compared to last year to 32.6% which is consistent with our goal to progressively deliver margin expansion. The classification to intangible assets of fixed annual fees for some frequencies that remain in Q4 2022 had a positive impact on nine months EBITDA after leases compared to 2022.
I remind you that there will be no impact on full-year 2023 EBITDA after leases compared to 2022 as frequency reclassification has been done in Q4 2022. The current operating profit from activities reached €585 million, up €63 million. Last, you can notice the gross CapEx was €1.1 billion in nine months 2023, a level in line with our 2023 target.
Moving to Slide 20. I remind you that our 2023 guidance is as follows. An increase in sales billed to customers, an EBITDA after leases of around €1.9 billion and a gross CapEx of around €1.5 billion, excluding frequencies. The 9-month results presented this morning highlight that we are on the way to achieve all our 2023 targets.
And now Pascal, I’m giving you back the floor.
Pascal Grangé
Thank you, Christian. I will now briefly comment on the financial statements on Slide 22. We have already discussed nine months sales and current operating profit from activities at the beginning of this call. A few more comments this morning with comparison based on the nine months 2022 published figures.
First, we recorded €77 million of PPA amortization during the first nine months of 2023, of which €46 million at Bouygues SA in relation with Equans acquisition. Second, other operating income and expenses were negative at €146 million in the nine months. This amount notably includes non-current charges at Equans in relation especially with the management incentive package in place and fees incurred by projects of disposals.
Some current operating charges were also recorded at TF1, mainly linked to real estate optimization and measures to accompany the digital transformation plan of TF1. It also includes non-current charges at Bouygues Construction in relation with the litigation judgment in Singapore which is closed now and a change in regulation in a country where reconstruction is settled.
Third, financial results stood at minus €316 million compared to minus €170 million in nine months 2022. This increase is mainly due to the cost of financing debt that increased by €108 million over the period, mostly due to Equans acquisition financing cost.
Fourth, a tax charge higher than in the first nine months 2022 was recorded, explained notably by the constraints related to international taxation, our presence in many different countries and the large range of tax rates applied in each of them.
And fifth, contribution of associates increased by — from minus €7 million to €50 million, notably thanks to Tipco Asphalt, a Colas subsidiary based in Thailand and the fact that Salto, a video platform launched by TF1 with 2 other partners and now stopped is no longer reporting losses this year. As such, net profit attributable to the group was €665 million, up €128 million compared to nine months 2022.
I will now turn our attention to the group financial structure. Moving to Slide 23, net debt was €10.2 billion at the end of September 2023. Compared to end December 2022, net debt was up €2.8 billion. I remind you that the group benefits from a particularly strong financial position and that our financial credit ratings remain strong. We repaid during this third quarter most of the remaining part of the syndicated loan put in place for the financing of the Equans acquisition.
Note that on the 2 of October, we issued a combined nominal debt of €450 million, representing total proceeds of €390 million, including an issue discount of €60 million, representative of the difference between current rates and those of coupons.
We tapped 2 existing bond issues for a nominal value of €250 million and the nominal of €200 million, the first one maturing in 2027 and the second one in 2030. Following these 2 taps, the average maturity of the growth loan was 8.5 years and the average coupon was 3.01% with an average effective interest rate of 2.26%. The debt maturity schedule is well spread over time. Last, let me add that we don’t have any bond refinancing scheduled before 2026.
Let’s now turn to Slide 24 to describe the net debt evolution between end December 2022 and end September 2023. Net debt increased by €2.8 billion since the end of last year. This change is mostly explained by the following items.
First, acquisitions net of disposal totaling minus €108 million. There is no specific — nothing specific to highlight. This amount notably includes acquisitions and disposals at Colas, Equans and Bouygues Telecom. Second, the Colas squeeze-out offer for minus €180 million. Third, the capital increase reserved for employees named Bouygues Confiance number 12 for €150 million.
Fourth, capital transactions are other for minus €37 million, including buyback of treasury shares and the liquidity contract. Fifth, the change in residual swap net of taxation and the swap settle for minus €44 million. Six, the repayment of dividends for minus €743 million. Then the payment of €310 million to free mobile and last, minus €1.5 billion from operations that I will comment in the next slide.
Turning to the breakdown of operations for the first nine months, 2023, on Slide 25, you can observe that. First, net cash flow including lease expenses increased by €233 million. Second, net CapEx was slightly up €38 million, highlighting attention of business segments regarding their investment in an uncertain context.
And third, you can see on the chart that the change in working capital requirements related to operation activities and others stood at minus €2.2 billion, an improvement of more than €800 million versus last year. As you know, it is very difficult to predict working capital requirements. As we do every year, we will remain very proactive during this last period of 2023 to manage the working capital.
Let’s make a brief aside related to Colas on Slide 26. First, on 20 of September, Bouygues filed a squeeze-out offer with the AMF with a view to delisting Colas at a price of €175 per share. This decision aims to simplify the capital structure of Colas, of which share capital was held by Bouygues for 96.8% at the date of the announcement.
This offer is subject to the AMF’s approval decision and we expect that the squeeze-out offer on the delisting of Colas will occur before end 2023. At the same date, the functions of Chairman and CEO have been separated with Pierre Vanstoflegatte, appointed CEO of Colas and I was appointed Non-Executive Chairman of Colas. Last, let me add that the impact of this transaction of the group’s net debt will amount to around €180 million.
I will now conclude this presentation on Slide 28. We are confirming the group outlook for 2023. We expect sales close to those of 2022, as well as an increase in current operating profit from activities. I remind you that this outlook is obviously based on 2022 pro forma financial information that assumes the Equans acquisition was completed on 1 of January, 2022.
Thank you for your attention, operator. Please open the floor for questions.
Question-and-Answer Session
Operator
[Operator Instructions] We’ll take now our first question from Nicolas Cote-Colisson from HSBC.
Nicolas Cote-Colisson
My first question is on Equans because I’m interested in the way you drive the margin by being more selective on profitability. So can you give us an indication of what share of revenue represents the new contract you are signing? I mean, whether they are recontracting with a client or signing a new client, as opposed to the ongoing contract and tell us whether the margin you are signing for is always in line or above your medium-term target of 5%. And also if you can help us on the level of margin in asset-based assets you are selling? I may have a follow-up question on telecoms but I’ll let you answer this one first maybe.
Pascal Grangé
Concerning your margin at Equans, no, we are not signing all contracts over 5%. We are increasing gradually our margin in order to cope with our financial target. So the improvement in margin will be gradual. You know that we have a backlog which represents €26 billion. So obviously and our order intake is around €13 billion. So this — all these factor will use a gradual increase in margin. So we are on the way. We are confident that we will be at the announced level at the end of the year. But a lot of things to do to be at 5% in 2027.
Nicolas Cote-Colisson
And sorry for my ignorance but the asset-based assets, is it something that is higher margin or lower margin?
Pascal Grangé
No, no. In fact, we are at the beginning of the curve. So there is no impact, in asset-based assets during the first year, your margin is not so high. So we are selling activities where, in fact, providing some revenues, let’s say, for the 2 assets we — for which we have signed some contracts, let’s say, it would represent approximately €300 million on profitability which is not higher than the average one. So no impact in the trajectory for the next year related to these disposals. It will affect obviously our turnover because when you have sold the activities, you don’t have any more revenue corresponding to these assets. But it was totally forecast in our trajectory we presented in January last year. The sole thing we didn’t know at that time, what would be the exact timing of this problem.
Nicolas Cote-Colisson
And just 2 very short questions on telecoms because you’ve recently cut prices for your top end offers. So if you can tell us a bit more about the dynamics in the different segments and whether you think that the proportion of SIM-only in the market may accelerate? And my second question is, just a short one. I just wonder whether Lyca Mobile is still MVNO on your network and how significant it is in terms of EBITDA given they just got €10 million flying in France and could be under financial pressure?
Pascal Grangé
So about — thank you Nicolas. About the market, I will say that we are in the same situation than in Q2. So in mobile, less volume growth than compared to last year, less promotions, calmer market, less terminal renewables and so on. So as you said, we have more and more similarly in the market. That’s the reason why our ABPU growth is €0.10 compared to last year. Clients are migrating to a cheaper offers and especially SIM-only offers.
Regarding the fixed business, the situation is very, very good. We had a good growth in volume in Q3. It was our best growth, I think, since — it has been our best growth since Q3 2017. So we are very happy with our performance in volume. And in terms of value, you can see that our ABPU growth is very, very good at €1.9 compared to last year. So good performance.
About Lyca Mobile, Lyca is still our MVNO. Yes. And I cannot give you any figures about the EBITDA, because if I do that, EBITDA is broadly equal to the turnover. So I cannot give you the price at which we are — we take a Lyca Mobile clients.
Operator
We’ll take now our next question from Nick Lyall from Société Générale.
Nick Lyall
Just to come back to the pricing please on mobile like Nicolas question there. Could you talk a little bit more about the pricing environment please? And I think you’ve just started to cut promotions. So could you tell us, will that be a little bit more of a help to the ARPU going forward, or is this going to be a difficult pricing environment now if customers are starting to spin down? And then just secondly on Colas, could I ask was — the revenue seemed a little bit weak this quarter. Could you also quantify if possible the land sale in the U.S. and just confirm that’s a sort of extraordinary item, as in it’s pretty much a one-off for the quarter and hasn’t occurred in first or second quarter as well?
Christian Lecoq
So I will answer your first question about pricing environment in mobile. Pricing environment is very, very good. Phone book pricing are going up. There is less and less promotions. We are able to continue to increase our back book pricing. So, regarding pricing, the situation is very good. The fact is that even if we are increasing our prices, at the same time, we see some clients migrating to cheaper offers. So the impact of the pricing — favorable pricing environment is not fully reflected in the ABPU due to this situation.
Pascal Grangé
As far as Colas is concerned on your question related to the results related to the disposal of an asset in the land in the U.S. It represents approximately a bit more than €40 million.
Nick Lyall
And there were no other one-offs like that in the first or the second quarter or last year. This is — as you say this is pretty much a one-off is it?
Pascal Grangé
Yes.
Operator
We’ll take now our next question from Mathieu Robilliard from Barclays.
Mathieu Robilliard
I had a few questions. The first one on construction which has some strong trends and the order book continues to be solid. And I realize this is a very uncertain macroeconomic environment but it seems that it is not affecting your business in construction. So maybe you should give us a little bit more color as to why you’re doing so well and how you expect the trends to continue in the next few quarters? In terms of telecoms, I had a question about the churn. Maybe I missed that somewhere but I was wondering what were the churn trajectories, both on fixed and mobile, considering all the price moves that we’ve seen in the market?
And then very lastly, I realized you give a guidance which talks about growth in revenues and COPA. You published a consensus recently on your website for the full year 2023. And I was wondering if you could comment how comfortable you felt with the guidance for COPA in 2023?
Pascal Grangé
I answered the first question related to the order book of construction activities. Obviously, we will have a lowering in our housing construction part but infrastructure, especially on international activity, remains quite strong. And this is the reason why we have that global level of order intake and order book.
Christian Lecoq
So in terms of churn, the churn level is quite stable for Bouygues Telecom, mainly due to the fact that even if we are increasing prices for back book, at the same time there is less and less promotions, clients stay with their offers and do not move to other offers.
Pascal Grangé
As far as the consensus is concerned, in fact we do not comment consensus, it’s not a guidance for our part. I just want to draw your attention on one important point. This point is the fact that last year, Q4 was quite strong. And it doesn’t mean that each Q4 are strong in such an extent. My comment is specifically related to Equans and Colas.
Operator
We’ll take now our next question from Jakob Bluestone from BNP Exane.
Jakob Bluestone
I had two, please. Firstly, just on the EBITDA, just to pick up on your comments around Q4, you’ve done 11% EBITDA growth in the first nine months. Your guidance, I think is sort of 7%ish. Can you maybe just remind us the magnitude of the comp effects in Q4, given it looks like you’re running far ahead of your own guidance?
And then just secondly, on networking capital which you alluded to in your presentation, obviously quite a big improvement year-on-year. I was just wondering if you might be willing to share some thoughts on where networking capital could land for the full year in terms of the overall group improvement?
Christian Lecoq
So I will answer the first question about Bouygues Telecom’s EBITDA. First, I remind you that we classified the way we account for some frequencies in Q4 2022. This leads to a first increase in EBITDA — favorable comparison on EBITDA at the end of nine months in 2023 compared to 2022. The impact is on €17 million. In Q4, as for the full year, there will be no impact compared to 2022. In Q4, you will have a negative impact of €17 million that will compensate the benefit at the end of the first nine months. And in terms of guidance, we are very confident to achieve our guidance.
Pascal Grangé
As far as the working capital requirement is concerned, you know, every year we say the same thing. First, we don’t guide on working capital requirements for very simple reasons. For construction activities, it’s impossible to do so. You have a trans payment, you have claims to be collected and so on and so forth. So you could have important variation in the working capital requirements. So we don’t guide on that subject. Obviously, having a higher — a better level of cash at the end of September is a good thing and we are very happy about that necessarily.
Our policy in terms of working capital requirement is very simple. We incentivized our guide in order to negotiate contracts with favorable payment terms. We are very dedicated to cash collection during all the contracts life. And this is — and as a result you know that we construction has a very favorable working capital requirement and we attempt to improve our working capital requirement in all our activities. A specific point on Bouygues Telecom, you know that Bouygues Telecom is growing and having this induce an increase in working capital requirement of Bouygues Telecom.
Operator
[Operator Instructions] We’ll take now our next question from Mike Sambru [ph] from Stifel.
Unidentified Analyst
I’ve got two questions if I may. The first one is on Colas. There was a sharp margin recovery so far this year. In the first nine months, it was 70 basis points, 30 basis points excluding the U.S. land sale. Would it be possible to split how much of that improvement is due to internal efforts and how much is due to the fall of asphalt prices which usually both quite positively for asphalt trading businesses? And the second question is on construction. So it seems like France was quite a bit weaker than international businesses both for Colas and Bouygues Construction. Specifically, I’d like to know how civil engineering is doing in France for Bouygues Construction?
Pascal Grangé
As far as your first question concerning Colas, no, we don’t have any indication to give on — we have a recovery, that’s for sure of Colas margin during the first nine months of this year. This is partly due to the fact that we don’t have — we have not been impacted in such an extent by fluctuation of prices during the first nine months. The second impact is obviously and you mentioned it, the long disposal in the U.S. But globally, it is a recovery of our activities and the profitability of our activities.
The second question was related to backlog activities. I think I gave you some information during France is, in fact, minus 1% from Bouygues Construction. The backlog — sorry, I have to check my figures. But you are right. Generally, you are right. The international activity is more dynamic than the activity in France. Our backlog is stable in France generally. And in terms of civil works, I don’t have the figure. But generally, it’s 12%, probably, in terms of activity stable in France.
Operator
We’ll take now our next question from Nicolas Mora from Morgan Stanley.
Nicolas Mora
Just a few follow-ups. First on a bit in the same line as the previous question. Just on Colas. You’ve seen the order book also almost slowing down to what plus 1% year-on-year on your roads. Is there anything special? Any particular areas of weakness. We had in mind North America was very dynamic. So I’m a little bit surprised by the slowdown. Then in the real estate, so we’re just about at 0. I mean, should we expect more pain ahead or can we expect a few, let’s say, last minutes Q4 sales in — especially in commercial to save the year?
Then on networking capital, I think the improvement has been most impressive at Colas outside of the incentives for management, I think we discussed in the past, is there anything particular to mention in the third quarter? And very last on CapEx. It’s especially weaker year-on-year in telecoms. Is it just phasing? Is there another pickup to expect in Q4 as we had in Q1, for example? Or you just basically close the tap a little bit on CapEx in the year?
Pascal Grangé
So your last question was about CapEx in telecom?
Nicolas Mora
Well, at the group level but especially in telecom which we’re seeing basically a slowdown year-on-year after a — is it just phasing? Q1 has been quite high. Yes.
Christian Lecoq
It’s only phasing we confirm our guidance of €1.5 billion in terms of gross CapEx for the full year 2023 and so it is only phasing. It is very difficult to look at CapEx in telecom business quarter-by-quarter. We guide on the annual guidance. And I confirmed the €1.5 billion for the full year.
Pascal Grangé
As far as your two previous questions, one was related to working capital. Let’s say that effectively we had an improvement in working capital at the group level, especially at Colas. I remind you that we were quite disappointed of working capital requirement of Colas last year. So working capital and that’s life of working capital for construction activities 1 year is favorable and the year after, it could be less favorable or the contrary. So nothing specific. But I confirm you that all our operational teams are dedicated to the improvement of that working capital requirement, either at the Colas level but also at the Equans level or older construction activities level.
The second question was related to the order book of construction in France and you were saying that it was quite slow. You’re right, the activity is not balance in France, you know the global environment. So we were expecting because in that period before local elections, we have generally a peak in order at Colas and we don’t see yet that movement in the order book of Colas. We don’t know what will be the future in that respect but probably, it will — the peak will be lower than previously related to the global finance equilibrium of local authorities in France.
Your last question was related to a Bouygues Immobilier in Q4. We will have activity in Q4 which is — we have generally some higher level of activity during the fourth quarter in Bouygues Immobilier. We consider we will have that movement that year, probably not in the same extent that in the previous year. And we will manage that very closely because effectively, the property development market is under great pressure at the present time. I think I answered your questions.
Nicolas Mora
Yes. Sorry, I was on mute. Yes. Just on Colas, so you — yes, you talked about France but I was looking actually at the broader roads backlog because we’re all under the impression, especially in North America was driving the growth. Europe was okay. So we — to date, the growth was pretty good. It seems it’s — maybe it’s just a quarter, so we shouldn’t pay too much attention, since the slowdown overall to the whole roads business has been quite stock. And at the flip side, you’re growing a lot in rail and historically this has been a less predictable, let’s say, low margin business.
Pascal Grangé
Less predictable, that’s right. But the market in fact, you know that rail activities which are decarbonized, transportation means are developing and we will follow that movement. But in average, you couldn’t say that the margin will be lower. We don’t know. It depends of our contracts.
Operator
We’ll take now our next question from Mollie Witcombe from Citi.
Mollie Witcombe
Can I please ask about inflation at Colas? Sorry, inflation in the backlog at Colas. So obviously, you said growth at 8%. But how much of that are we looking at for inflation? And I was wondering also whether you’d give us an indication on how much is recurring of the stuff that you’re winning internationally? And then, my second question is on Equans. Obviously, some of your competitors are seeing really excellent growth in energies on kind of overall and whilst you’re seeing great growth. I’m just wondering is it that the mix of the business is different and that’s why you’re not seeing such high growth at the moment or is it 100% just because you’re working on margins?
Pascal Grangé
Your first question is related to Colas. And what — we have some difficulties to hear you. Is it related also to inflation? In fact, we — first, the overall backlog of Colas is smaller than that Bouygues Construction. So a lot of contracts are short-term contracts where you can adapt your pricing to the current level of prices. So you don’t have any impact and long-term contracts are very few. In most cases, you have some indexation formulas when you have long-term contracts. This is right at the overall level of Colas and Bouygues Construction for long-term contracts.
For Equans, we didn’t change the mix because we have an activity where if you have — you couldn’t change the skills of your teams. So it’s really an operational improvement in pricing. They make effort to better pricing. And they are developing all levies they have identified and presented during the capital market today in last February. So it will be a gradual improvement of Equans margin over the next years.
Operator
We have no further questions, so I will hand you back to Pascal to conclude today’s conference. Thank you.
Pascal Grangé
Thank you for joining us today. We’ll be announcing a full year 2023 results on 27 of February, 2024. Should you have any further questions, please contact our Investor Relations team. Their contact information is on the press release on our website. Thank you very much.
Operator
Thank you for joining today’s call. You may not disconnect.
