Vinci SA

PAR:DG

Earnings Call Analysis

Robust Growth and Improved Profitability

The company reported a resilient first half of 2023, with a notable 13% revenue increase, including 12% organic growth, indicating consistent positive momentum across the business. International operations enjoyed a significant 20% organic growth, reinforcing the strategic focus on expanding global reach. Additionally, operating income soared to €3.5 billion, an impressive 11% of revenue, marking a substantial boost of €724 million compared to the previous year. Net profit climbed sharply to €2.1 billion, affirming a successful period. The company also saw free cash flow turning positive, a marked improvement over the last year.

Robust Revenue Growth and Optimistic Outlook

The company has witnessed a commendable 13% increase in revenue, signaling strong momentum across its business segments, closely aligning with growth trajectories of previous years. Specifically, the organic growth stands at a homogeneous 12% across the key sectors, emphasizing the solidity of the company's core operations, with the exception of real estate which observed a 23% drop in revenue. The story gets even brighter when we factor in the acquisition of companies like OMA, contributing significantly to the top line. Despite the somewhat negative currency effects due to a stronger euro against sterling, the combined domestic and international operations suggest a well-positioned company on the growth curve, ready to leverage its strong business model for continued expansion.

Improvements in Operating Income and EBITDA

Operating income has significantly risen, reaching €3.5 billion, which equates to approximately 11% of the company's revenue. This uptick is considerably due to improved performance across multiple segments, particularly VINCI Airports, whose EBITDA soared to €780 million. The only offset comes from the real estate segment, which endured minor losses. Cost of debt and financial expenses highlight careful financial management, even with rate hikes and the expensive restructuring of debt related to the acquisition of London Gatwick. The company's net profit ascended to a striking €2.1 billion, with an earnings per share (EPS) of €3.65, painting a robust picture of its financial health.

Strengthened Capital Base and Liquidity Reservoir

The company proudly stands on a capital employed of over €56 billion, with a significant portion allocated to VINCI Airports and highway concessions. The financial policy emphasizes high liquidity levels, which currently boasts €18.5 billion, including readily accessible cash reserves and credit lines. This assurance of liquidity is strategic for the company's ambitions, maintaining strong investment capacity and managing growth without undue market pressures.

Outlook: Projecting Steady Growth Amidst Rising Costs

The company's outlook remains optimistic, even if the forecasted growth for sales and operating income in 2023 might lag slightly behind the stellar figures of 2022. Nonetheless, the expectation is that net income could still edge slightly higher. This positive outlook is also underpinned by forecasts of healthy sales growth and maintained operating margins for VINCI Energies and Cobra, consolidating the company's position in its market space despite increased borrowing costs.

Inflation Risk Management and Diverse Skill Set as Competitive Edges

The company has adeptly managed the transfer of inflation risks to customers, especially in the construction sector where this has not been traditionally done. This nimbleness in risk management, coupled with the diversity of skills that VINCI Group brings to the table, allows the company to undertake large projects with a high degree of confidence in managing technical and organizational risks. Furthermore, the increase in EBITDA of VINCI Autoroutes, driven by productivity and volume, reinforces the company's earnings trajectory.

Resilient Airport Traffic and Responsiveness to Regulatory Changes

VINCI Airports showcases resilience, with traffic bouncing back to 2019 levels, indicating recovery and potential for growth. The company must, however, stay vigilant to regulatory shifts, such as the potential taxation on French autoroutes which could represent broader changes in contracts going forward. Even so, the robustness of the company’s operating framework suggests an ability to adapt and thrive amidst such policy changes.

Earnings Call Transcript 2023-Q2

[Xavier Huillard, Chairman & CEO]

Good morning to all. Thanks for joining us for the presentation of our first half results. So a few pictures to start with on the cover of the booklet you no doubt have before you. There is an artists view the future cycle station mega contract of Line 15 West, we won recently this is the first with the Grand Paris company design and build 5 stations, 14 kilometers of tunnels, €2.71 billion of revenue to be delivered in 2030, '31. The Grand Paris Express is truly becoming a reality, and it's without the going to boost the economic activity in the Paris region.

Next, we often talk to you about decarbonizing the road, and in particular, the auto route that's imperative and urgent. And we're going to be testing 2 technologies, allowing all e-vehicles, in particular, trucks to charge as they roll. It's a big advantage because you can reduce the power and weight of onboard batteries. Tests will take place over 2 years, '23 to '26, on 2, 2 kilometers stretches near [indiscernible] being to certify the technologies that could then be deployed on very busy auto root stretches.

Next, a photograph here that shows one of the platforms of the Cape Verde Islands. We completed and closed the financing of this 40-year concession, whose aim is to support, stimulate economic growth through the development of tourist potential of these islands and of course, in our program, we've planned to make major initiatives for the environment and the production of renewable energy. It symbolizes the fact that we continue to grow in the airport sector.

We're consolidating through these Cape Verde' airports, our leadership as the leading global private operator, operating 17 airports across 13 countries. We've also strengthened our stake in Via 40, and Colombia work is progressing at pace.

Next slide is the image of a project won by VINCI Energies and VINCI Construction at work, about € million for the 2 conversion, AC/DC stations as part of the power interconnection between France and Spain in the Bay of Biscay. And then a shot of the PV farm connected to the Brazilian grid, the BelMonte farm, 570 megawatts peak power. The shot of a construction project achieved by VINCI Construction and Consortium, the Sydney Gateway in Australia, €900 million to build, refurbished 5 kilometers of road, 19 bridges and cycle lanes to illustrate the fine breakthrough by VINCI Construction over the past 10 years in Australia, in New Zealand.

And lastly, the signing of plan of the first co-living project developed by VINCI Real Estate in the Paris region. This is part of a broader operation of urban regeneration on a former waste line where we're developing the co-living, many homes, nursery with a rewildling project.

So just to show you that, as on previous occasions, we're seeing that the world is brimming with projects, and this allows us to be extremely selective as we move forward.

Next to say that H1 performance at VINCI was very solid. VINCI Airports, a spectacular turnaround of traffic that has returned to its pre-COVID levels. If we don't take into a part, the part of the world that's lagging slightly behind AG, VINCI order rates traffic is trending well. Strong growth of activity and operating margins at VINCI Energies and Cobra, good selectivity of VINCI Construction also improving its operating margin. All this on Slide 12. Sees H1 revenue to grow by 13% versus last year, whereas, as you can see, EBIT grows from €724 million over a year.

You'll have noted the free cash flow of the H1 that doesn't, of course, represent annual free cash flow. As you know, a great deal of seasonality in our business. This SCF, what's interesting is that it's a positive, up €542 million as compared to where it stood last year.

And lastly, order intake being renewed very satisfactorily, both in volume and quality. That's important. We can remain confident, which is the best way of winning attractive projects with a good level of margin.

If we now turn to the geographical split, you see that all our major areas are up often very significantly as the case in Central and Eastern Europe, Western Europe, excluding France. France is up 7%. Also the case in the Americas broadly and in Asia, Oceania. It's worth noting that international business now represents 56% of our total activity.

Diving deeper into the various businesses, VINCI Autoroutes, light vehicle traffic is up benefiting of a number of effects. A base effect, first of all, due to the fact that last year, in January 2022, there was still a residual COVID effect. So we're benefiting that this year in terms of the base effect, number of calendar effects also there were more business open travel days for cars, visiting friends and relatives, VFR over last year. So the numbers growth of light vehicles is very useful, 2.8%, even if it's somewhat boosted by the effect that I mentioned.

Truck traffic is down slightly, 1.2%, for calendar effects, that is the number of opening days during which trucks can travel, but it's quite likely that this slight dip also reflects economic growth, which, as we all know, is not particularly buoyant at the present time.

So I won't deliver the usual speech about the Autoroutes decarbonization. You've heard it a number of times, but we're going to trial the 2 engineering operations of dynamic recharging that I mentioned at the outset. And to say that all our service areas, our 180 service areas, are now equipped with charging points with 1,326 as we speak, 1,500 by the end of the year, and it's important on the Autoroutes, ultrafast charging points of at least 150 kilowatts. Important to add that we're gearing up to equip not just our service areas, but our rest areas with a program to equip some 50. On the airports, as I said, traffic is recovering.

June traffic levels was only down 6% versus the pre-COVID situation, excluding Asia. As I said, we're at the pre-COVID traffic levels with very solid performance levels in Portugal, Serbia, Dominican Republic, or more recently in Mexico. We acquired the cluster of airports around Monterrey, the right time because since the acquisition, traffic is holding up very well. Traffic continued to grow in the U.K., driven encouraged by a strong increase in flights in Japan, an interesting point. International regional traffic, Singapore, Korea, Taiwan is strongly accelerated of late, whereas traffic with China is being reestablished gradually.

VINCI Airport, very good containment of operating costs in spite of cost inflation, not just energy. And all this leads to the performance shown here, and in particular, a fine increase in the operating margin. Of course, we continue to roll out our environmental policy across our 72 assets.

Other concessions, slide 16. As I said, we've strengthened our stake in Via 40 in Colombia that we now fully consolidate. We included Entrevias in Brazil, a concession of 570 kilometers in the state of Sao Paulo. Just after the 2 slides I've shown you, I'd like to indicate that the strategy incepted in 2006, aimed at diversifying our infrastructure. Concessions projects by growing VINCI Airports allow us to post the significant figures. You can see that excluding French Autoroutes today, in concession, we're achieving €2 billion in that business and €1.2 billion in EBITDA on the half as against, as you saw previously, €3 billion in business, €2.3 billion EBITDA for VINCI Airports. So it's progressing. We're beginning to reap the benefits of the strategy that was initiated back in 2006.

Works, look at the order intake, excellent level, as you can see on Slide 17, both at VINCI Energies, Cobra, as well as VINCI Construction, and you also segments, geography, France, Europe, excluding France and international are all up with particularly strong growth as regards international.

Diving deeper, VINCI Energies is in great shape, well established across the 4 major dynamic trends. Energy efficiency, the energy transition and it's [indiscernible] the electricity development that is growing in the energy mix and also the digital revolution with its huge need for data capture, retrieval, data storage, data operations and management that accounts for the sharp increase in the business, 18% on the half versus last year, 13% France and 21% outside France. And international, where we've gone flat out for a while, represents 56% of the total VINCI Energies.

What's more is improving. It's EBIT margin, 6.8% on the half as against 5%, in '22. And in accordance with their corporate culture, continuous flow of small to medium deals, 14 since the end of -- beginning of the year to complete our geographical coverage and expertise of VINCI Energies is proving to be an extraordinary machine that has a key role to play in the energy and digital transitions underway.

Cobra posting the same momentum, both in terms of flow business and the major ramp-up in East PC projects linked to the energy transitions with new AC/DC conversion stations for offshore wind farms in the North Sea, with, of course, high-power transmission projects, high voltage in Brazil, Australia. Also a good crop of PV farms, be it in the Iberian Peninsula or Brazil. The BelMonte power plant in Brazil was, as planned, connected to the Brazilian grid and put in to production the day before yesterday. It's a major milestone for us because it's the first renewables project fully developed by Cobra, and that we're going to keep in our portfolio.

So since yesterday, we can consider that we're producing green power big time. Others in Brazil, Portugal, Spain, total power of 1.4 gigawatts to be constructed before the end of the year. The performance shown here are being delivered both in terms of energy development, order intake and EBIT margin.

VINCI Construction, we're also seeing a very good half, revenue up 11%, 7% in France, 15% internationally. The activities comprised of many local projects, building civil engineering projects, the flow business, as we call it, but activities particularly buoyant in major mobility infrastructure in France, the Grand Paris Express, line HS2 in the U.K., several Autoroutes, rail links in Canada, Australia, New Zealand, the fixed link. The undersea fixed link are pretty extraordinary between Germany and Denmark.

Let's dive deeper on the order intake. Very good progress of small projects below €5 million represent just over 60% of the order intake. It's important for us because it generates a great deal of resilience, and that's not always how we're perceived because we communicate a lot on the major projects that allow us to show you some fine pictures, but you need to know, over 60% of the business logged over the half projects lower than €5 million. It's very important to try that because that's what allows us to maintain the resilience of VINCI Construction.

At the same time, we're seeing an increase in projects between €5 million and €50 million, and this is something we've seen for a while now, an increase in the elementary size of projects, which is pretty much a good news. Because very often, these are more technical projects, in which we can better showcase our ability to deliver value added. You're seeing that VINCI Construction is now achieving 55% of its business internationally, in accordance with our strategy, and the EBIT margin continues to grow.

But of course, as you know, that this margin is in a way a reflection of the full year because of the high seasonality of a number of sectors, notably road construction.

Lastly, VINCI Immobilier, real estate that doesn't escape the deep crisis. Reservations are down 36%, revenue down 23%. It's obviously not very good news. But for us, as you know, it's a very modest activity. We can also note that 2 segments are performing better, that of hotels and what we call managed residences either for seniors or students. This is a sector that is still faring quite well. We have 38 residences in service and 9 new managed residences to be commissioned by the end of the year. That's what we can say now.

Over to Christian Labeyrie, who will reflect that in the figures.

[Christian Labeyrie, CFO & EVP]

Slide 24. Slide 24 compares changes in revenue for H1 '23 relative to H1 2022, listing a 13% increase in revenue, including 12% organic growth. And this reflects the good momentum in our businesses in line with the previous fiscal years. The change is homogenous between the 3 main ranges between 12% and 13% organic growth, plus 13% in concessions. The rebound in air traffic and continuous good traffic on highways, 30% of Energy, 14% for Cobra, 12% of VINCI Construction. The only caveat, as we said, is real estate drop a 23% drop in revenue. Scope effects are relatively limited this year.

To date, growth contribution of 2.6%. Additional growth, which comes in addition to organic growth with the consolidation of OMA, which accounts for about €300 million revenue over the half year, for the acquisitions between last year and this year, which provides additional revenue of about €380 million. The main 2 segments are ICT by Kontron in Europe and Otera in Norway.

We're talking electricity infrastructure. So [indiscernible] slightly negative, minus 0.6%. That is the impact of the euro rising against sterling.

Next slide, France versus international, strong Boeing business in international operations of 20%. This gives us organic growth of 16%. But France has nothing to be ashamed of with strong growth of about 7%, which is slightly higher, more much higher than inflation. So we're talking 56% of the total increasing year-on-year. This is one of the main thrusts of our strategy, has been for years. We want to increase the share of international operations in our revenue and profit.

Now operating income, €3.5 billion, i.e., 11% of revenue, an increase of €724 million. A strong increase in VINCI Airports. EBITDA reached €780 million, and half of that is due to the consolidation of OMA EBIT for VINCI Airports exceeds €1.6 billion. It's an improvement of over €150 million. And we're also seeing improvements in VINCI Energies, Cobra IS and VINCI Construction, both in quantum terms and in terms of the margin rate.

As I said before, the only caveat, as I said before, is real estate, we're seeing a slight loss of €16 million in the first half versus a profit to €28 million last year.

Now our operating income, Slide 27. We are seeing a strong increase of the IFRS 2 expense, which is mostly explained by the increase in the expense related to the group savings plan. Due to strong subscription initially, we have created 5.9 million new shares in the first 4 months period of the year.

We're working on the business 4 month periods, but there's also been a change in method, which has currently been implemented in France following recommendations from accounting authorities, and this means a lower discount linked to the mobilization of shares.

Other aspects, we're seeing an improvement in equity accounted associates. And this can be explained by the better performance of airports in Japan, which have now broken even, even though traffic has not returned to its 2019 level. Very few nonrecurring items as you can see. We're seeing an increase in cost of debt and financial interest. It should have been higher than what we're seeing on this screen. Because out of €340 million in net financial expenses, we take into account the one-off impact of €170 million linked to the restructuring of the debt incurred to acquire London Gatwick.

So this impact, unfortunately, will not repeat itself every single half year, but we managed to cut our losses caused by the impact of interest rate hikes. We're seeing an increase in the tax liability, and a stronger negative contribution of noncontrolling interest, which represent the share of our partners . They own less than 50%. And share of OMA shareholders, which exceeds 70% of the share capital. So in a net profit of about €2.1 billion, sharply increasing over last year. And this is reflected in the EPS of €3.65 per share.

Next slide, please, #28, we're seeing changes in debt over the half year. Next year, we can do a comparison over a 12-month trailing basis, which is probably more relevant considering the seasonal variations in our businesses. However, we are seeing an increase, which makes sense. This half year, despite a strong increase in EBITDA, €5.3 billion versus €4.5 billion in the first half of last year. VINCI Airports accounts for over 40% of EBITDA. And energy in the broad sense of . VINCI Airports account for about 20% of EBITDA for the half year, respectively.

WCR, is shifting negatively. It has increased over the first half of the year, but to a lesser extent than last year, thanks to Cobra and VINCI Construction. Financial interest is up. Taxes are up. That makes sense. We onto analyze that CapEx is also strongly up, about €500 million. And this mostly relates to VINCI Airports. You probably remember that it strongly reduces investments during COVID, particularly with regard to Gatwick.

And Cobra IS, is investing into its public private partnership or projects, electricity infrastructure projects in Brazil and renewable energy projects, particularly Belmonte. We're seeing a number of disposals and the impact of dividends and share buybacks, which is slightly higher than what it was last year.

So by and large, debt is less than €21 million. And breakdown between gross debt, about €28 billion, and cash to the extent of €800 million.

Next slide, please. This reminds us that, yes, we are happy that we are in positive cash flow generation territory. Hasn't happened very often, only 4x. But let's stay humble because the bulk of that cash flow is generated in the second half of the year. We could even say in very last months or even weeks of the year, due to significant inflows in the fall.

However, this is still a source of satisfaction. The free cash flow in H1 is improving relative to H1 last year. We are in positive territory.

Next slide, please, the consolidate balance sheet. Our capital employed accounts for over €56 billion. Out of the €56 billion, we have €44 billion in concessions, broken down as follow: €20 billion for VINCI Airports, €20 billion for VINCI Airports and about €3 billion for the other concessions, VINCI highways. The rest -- the rest of the €23 billion, and we have about €10 billion, € billion WCR. So VINCI Energies, Cobra, so the energy branch accounts for a little over €10 billion.

So much for our balance sheet. Now our financial policy. I keep saying the same thing. But it makes sense. So I don't see what actually changed my tune. Liquidity is high. It's important to us. It's important to have liquidity to have cash when you have gross debt that you need to manage. And at the same time, you need to grow in order to maintain our elbow room so we can make the right investment choices when we need to make them as opposed to based on financial constraints that come from markets.

At the end of June, we have €18.5 million in liquidity, including €8 billion in cash. The €10.5 billion in credit lines will be brought down to €8 billion. We decided not to renew €2.5 billion. Credit lines set up in July last year for 1 year, but that could have been extendable. So what's the point of continue to pay fees when we don't absolutely need to. So €8 billion in cash, broken down as follows: Between the holding company and our subsidiaries. So in total, €8 billion, which is still a pretty good level of cash.

Our rating, both for S&P and Moody's, has been confirmed. The level is good, A- , A3, depending on S&P and Moody's with outlook stable in both cases. This means we will continue to issue bonds in the lower right-hand corner. We have issued a bonds for €1.3 billion between ASF and VINCI SA in over a 12-month trading basis. We're doing pretty well.

Yes, credit terms are more expensive than in previous years, but we're still doing pretty well over 3% for the annual coupons.

Last slide, the change in gross cost of debt. It's relatively limited 3% of the average cost over the first half compared with 2.5% in H1 2022. And [indiscernible] 3% takes into account the one-off item that I talked about before with regard to the debt incurred to finance the acquisition of . Otherwise, we have about 4% -- a little over 4% in cost of debt, which is more than previous years. And on the right-hand side, you see the explanations. Shifts in the different currencies we're about 4%, slightly under 4%. But considering yesterday's ECB announcement, it could be higher in the next few months. We're hoping this will stabilize, and we expect the trend will go down. Sterling close to 5%, dollars higher than 5%. On the left-hand side, the pie chart shows that a significant share of our debt is no longer euro-denominated. And this shows our growth for numbers used. Now we've grown our business in the U.K., but also in the dollar zone in Latin America, and these currencies are costing us more than the euro, obviously.

[Unidentified Company Representative]

Thank you very much, Christian. I'll go quickly before Q&A. This is our outlook for 2023. For the most part, we are reiterating our guidance. I will point out the slide changes when it comes to French auto routes. As usual, much will be decided this summer, and it is premature to revise our guidance of stable traffic mix for the year as a whole. With regard to VINCI Airports, clearly, we are on the right track. But we are not expected yet to fully return to 2019 levels due to the delay in Asia, including Japan and Cambodia.

Regarding our construction businesses, we need to look at our order book. On Slide 36, we can see that our order book is both at an all-time high and of excellent quality. VINCI Energies, well, what's the outcome? 2023, we'll see growth. VINCI Energies is expected to maintain, at the very least, the high level of operating margin recording in 2022. Cobra has a record order book and is expected to record sales growth of at least 10%, while remaining among the best in the industry in terms of operating margin.

For keen observers, you will have noticed the 2 changes compared with our previous guidance. First of all, with regard to VINCI Construction. VINCI Construction is expected to be slight sales growth and improve its operating margin. And free cash flow, as we said, the 6 months ago, free cash flow should range between €4 billion and €4.5 billion throughout the year.

Now we'd like to add that we should be closer to the top end of that guidance range. So for VINCI as a whole, we expect further growth in sales and operating income, but to a lesser extent than in 2022. And our net income should be slightly higher than 2022 despite the increase in borrowing costs. That's all we can say.

So we would like to reiterate that VINCI is a solid company. We're extremely diversified in terms of business lines and increasingly so, in terms of geographies, our group is well positioned. On the underlying trends, the environmental transition and the energy transition, we are highly agile organizationally. We are poised to weather the crisis. We've shown that throughout the COVID pandemic.

We're also feisty when it comes to securing contracts where we can fully show value added. And this means we are well equipped, and we're particularly confident in our ability to pursue a virtuous and sustainable growth trajectory over the years to come.

I'd like to wrap up by saying that in view, of all these factors, the Board of Directors, which met yesterday, has decided to pay an interim dividend of €1.05 per share. And of course, this does not project the outcome for the full year.

Page 38 shows the sequence of dividend payouts over the past 10 years. Our Excom members are also here, or have logged in remotely, and we we're standing by to answer any questions you may have.

[Operator]

[Operator Instructions]. Question one, Jean-Christophe Lefevre Mulan, CIC.

[Jean-Christophe Lefevre-Moulenq, CIC]

Can you hear me.

[Unidentified Company Representative]

We can hear you.

[Jean-Christophe Lefevre-Moulenq, CIC]

Wonderful. A couple of questions on my end I have a general question regarding the risk equation for projects, particularly Cobra IS project and renewables, a number of important contracts for third parties we have more color regarding the breakdown of risks? Are you bearing all of service, particularly when it comes to commodity supplies? Are you sharing risk for the customer?

Same thing for the Cape Verde contract. Design, build contracts are riskier. Can we have additional explanations on that? In addition, and I'm happy about that. VINCI Autoroutes is improving its EBITDA by over BRL 160 million. What is the highest contributor to the growth in EBITDA?

[Unidentified Company Representative]

I don't know how you do it. Whether in person or virtually, it's way Jean-Christophe is to ask the first question. I don't know how he does it. Congratulations. Regarding Cobra, more specifically, but of course, this applies to all of our VINCI Energies and VINCI Construction businesses. And obviously, they'll take this verbatim, but we are moving into a phase where the ability to do things ourselves is absolutely key. And this gives us good pricing power relative to your customers. Because there's a growing number of geographic areas where our customers have a lot of projects, but they don't necessarily know how to go about it. And they don't have a lot of providers that can help them.

And this means we are well poised to maintain our selective policy. We only took an interesting projects where we can truly provide value added. But also, we get to be a little more ambitious when it comes to profit margin. So that's an underlying trend.

Of course, needless to say, Cobra, this applies to Cobra as well. When it comes to the breakdown of risks, how we wish to break down risk between us and our customers, can answer that question. You can take the question regarding inflation and how we pass on our higher cost on to customers. And also with regard to the contracts and the Greater Paris project.

[Unidentified Company Representative]

As if you rightly said, the ability to do things and get things done is more and more a prerequisite, and that's what our customers care about. When it comes to DP contracts, there's a long months, months sometimes yours on phase marked by workshops and through those workshops with the customers and other candidates to get to fine-tune the project, the shape of it and the contract terms and conditions. So more specifically, get to fine-tune a transparent allocation of risk between the customers and the consortium of contractors.

The customer should bear the risk that he knows how to manage that way they understand that it's better for them to bid those cost themselves rather than to assign them to the contractors. So on preparation for the contract is absolutely key. It's a long process, but this is how you ensure a proper risk breakdown. It's important, particularly when it comes to inflation, a growing number of customers prefer to bear that risk, particularly, including in sectors where they were not used to doing that, the construction sector, in particular. So those risks have been successfully transferred to the customer.

[Xavier Huillard, Chairman & CEO]

What I'd also add is the diversity of skills in VINCI Group in each of the divisions whilst coming together with varying sets of expertise on the multi-business contracts. It's the case for the Grand Paris project, where we have underground work experience on the conventional contracts, rail experience, experience from the energy world, and this ability we have to work together across the various groups skill sets is a real value.

So each can manage these technical and organizational risk, plus the ability with our grand project entities. We have to federate all that and provide project governance and leadership that we're fully confident in our ability to correctly read the risks on these big projects.

Well, I didn't quite understand the last question on the EBITDA of VINCI Autoroutes, but maybe Pierre Coppey provide you an answer. But on the EBITDA of VINCI Autoroutes, it's up significantly. There are 3 packs: productivity, volume and a base effect of the TP09 index on calculate provision for major repairs last year, and that accounts for the spectacular leap this year.

[Operator]

[Operator Instructions]. Our next question comes from Elodie Yvonne from JPMorgan.

[Elodie Yvonne, JPMorgan Chase & Co.]

Everyone my first question concerns the hot topic regarding the auto routes and the government's proposal to tax all the French concessions order rates will be the major contribution to that. Could you perhaps give us an update on where we're at current data play on your view? Do you think that this project is likely to pass? What extent is the motorway operators mobilizing? And if it goes through, could it herald further changes in contracts going forward? That's my first question.

Second question on airports. So we saw that traffic has returned to 2019 levels. But as of now, are you fearing that we've kind of reached a peak on growth where we see a lot of fair amount of disruption this summer? June traffic levels were already slightly impacted by major -- many strikes in airlines that are reducing capacities and be highly focused on yield? So I'd like to have your view on that.

And Thirdly, a minor, more technical question on Lisbon in particular, Lisbon Airport. Montijo, have discussions progressed on the expansion? When do you think we can start the works? And what about the CapEx?

[Unidentified Company Representative]

Going to hand over to Pierre Cape to talk about the Autoroutes, Nicolas Notebaert, the next two. Yes, on the taxation of the plan to tax the Autoroutes, You need to recall here that this idea stemmed from the erroneous idea that there's over profitability of the autoroutes concessions. This idea was countered by a number of arguments. But I would note how it went unnoticed at following the statements made by the government, the finance committee on the 22nd of March, the ART, the transport regulator we did a focus on the profitability of concessions that came after its report back in January this year.

And its report in January confirms that there's no significant gap between the project. IRR, rate of return of concessions as planned and as noted in the calculation to date done by the regulator ART. Then the government had pledged through Minister to give the view of the council state. On the 2 questions put to it to what is it possible to change the duration of concessions? And is it possible to tax Autoroute concessions?

And to date, we have not obtained the publication of this opinion. I think it would be good for the contractual stability and of course, the contractual loyalties this opinion be published. So we continue to ask for the publication of that opinion wouldn't allow us to know what legal framework we are, because we now know what economic framework we are now that the ART has published its focus. Nicolas?

[Nicolas Notebaert, CEO, VINCI Concessions]

Yes. So in terms of growth recovery, you'll have noted that a few years back, it was envisaged that return to previous growth levels would be later, '24, '25. Excluding Asia, we're now back to pre-'19 levels. So as we put in the document, we're seeing major variances. We see our geographic mix is ensuring growth drivers that are set to continue. Why? Asia, Japan, Cambodia were well below 2019 traffic levels, so this recovery of Chinese traffic, that hasn't really taken place, guarantees, steady progress in H2 and going forward, probably through to return to normal. That's what's missing.

Chinese traffic, Japanese outbound, Japanese travelers, that's still lagging in our mix. And then about your question on Europe. Well, Europe, today, currently we're pretty much on a '19 -- 2019 level. There are difficulties of European air traffic control, both social and technical difficulties, problems that you've flagged. But to date, they're not leading to a reduction in travel demand. We're seeing that bookings, reservations is some what very buoyant, notably intra-European traffic and tourism and VFR, have recovered very well, way above 2019 levels, not the case for business travel.

So our geographic mix and diversity is such that growth drivers that haven't yet recovered guarantee an uptick. That's why we're pretty confident for the coming months.

Turning to Lisbon now. We're resuming CapEx. We did some quality investments on the current site. We have regular extension plans. And we're seeing that Lisbon traffic, you've seen our figures at the end of June, is very good. Portugal generally is one of the 3 European countries with the strongest growth in the first half, growing strongly versus '19. There's a national public debate and that due date has been postponed till the end of the year, early next year. The next steps is to the countries, the grand tours to decide on the we're confidently awaiting on the decision for the future capabilities of Lisbon Montijo. But we're investing in Lisbon airports that Portugal are ensuring strong traffic growth in Portugal.

[Operator]

A final question on the French call comes from Nicolas Mora, Morgan Stanley.

[Nicolas Mora, Morgan Stanley]

Did you say something you spoke, but we do not hear you. I think that energy when I wanted to go back to the issue of Autoroutes. I just want to understand this point of view. But I think that the question has more to do with your discussions with the government? Is there a dialogue going on? Is there the possibility of dialogues on taxes, but also in the broader sense on contracts? That's my first question.

Secondly, one thing is sure. When it comes to VINCI Energies and Cobra, we're seeing a slight slowdown in Q2. What kind of expectations are you seeing in the field from industry players? Are they looking for projects such as data centers? Or are you seeing like a esteem there?

When it comes to airports, Gatwick in particular, maybe we're biased because we're based out of London. But Gatwick, doesn't have a good reputation, quality of service is still bad. What are you intensions? Are you going to invest more -- invest more OpEx into Gatwick to secure medium-term growth, improved quality of service at Gatwick? And 1 last question, if I may. Regarding the CapEx level. Could you give us more color on Cobra's CapEx? What's breakdown between renewable energies, PPPs, the nonconcession CapEx profile for the first part of the year, which is significant?

[Unidentified Company Representative]

Okay. So obviously, there's a lot of questions coming in both from Nicolas and Elodie. Pierrre, did you have an opportunity to talk to the government about all that?

[Pierre Coppey, EVP & Chairman, VINCI Autoroutes]

We talk to the government on a regular basis whenever they ask us to help improve purchasing power of French residents. And we believe that it is not a legitimate to levy additional taxes on highway concession companies. We challenge those plans, and we request transparency when it comes to the [indiscernible] opinion. In addition, based on the work that we've been doing both at a local level with local authorities and also the work we're doing on decarbonization, investment needs are huge. And it is urgent that we address them. This is more urgent than levying a tax, which is not legally sound.

[Nicolas Mora, Morgan Stanley]

Okay. This spice things up. Hello. Now. In the field, we're not seeing any kind of slowdown. Well, yes. Growth is showing a slowdown, but we're still double-digit growth, so it's still handsome growth. The month of May had a lot of bank holidays and that slowdown production. And generally speaking, as Pierre was saying, our customers have a lot of projects. Some of those projects are big. So the main problem is having the capacities to roll out those projects over the long term and satisfactory session. So we don't have any concerns at this point when it comes to our ability to grow our business.

On the contrary, that slowed down to reasonable levels is a good thing. And we're still very much focused on controlling the profit margins, managing our risks well. And as Pierre was saying, it is important to negotiate. And to ensure the negotiations cover our contractual breakdown averse between us and our customers so that we can complete the projects or the long term. But we're not seeing any kind of slowdown in the field on the contrary.

There's a whole raft of projects coming our way. And a lot of contracts that will soon expire. Now the problem is not finding contracts and signing the contracts. It is finding teams that will develop the passion that we want to implement those projects.

[Unidentified Company Representative]

Hello, Nicolas. Now perception of Gatwick has nothing to do with Gatwick's operating costs. The teams there -- the teams there particularly when it comes to the safety controls and security controls, those are responsible for less than 5% of the delays, we restaffed that airport in time. There are no headcount problems there. There are multiple factors involved, as I said before.

Air control, at the EU level, both technically and workforce-wise, things are not up to scratch yet. And so when you are unable to travel to Spain or Portugal, you're unable to transit through France because of workforce or strike action. Obviously, flights are delayed, and there's a lot of the joint activity at the airport level that is not being handled well. Ground handling for example, is not outsourced to the airport. It's done by airline company contractors and the airline companies themselves don't necessarily have the spare capabilities or headcount to address those operational difficulties.

So like I said, this airport comes under constraints. But as far as we're concerned, there are absolutely no operating savings that are designed to limit the freedom of passengers. And that's the reason why when it comes to Gatwick, we filed a DCO. And we're expecting this to come through in January 2025, and this will help us improve resilience at Gatwick. Particularly the Northern runway in Gatwick, we want to be able to use that runway by January 2025.

And for that this means more CapEx so we can increase the capabilities of the London airports. There is a lot of uncertainly when it comes to [indiscernible] as well. So as a concession company, we're doing our part to prepare to gear up to developing advanced solutions to ensure the future of those efforts. So this has been broadly investigated.

When it comes to Cobra IS's CapEx -- microphone, please -- there are about €200 million in CapEx, in operating CapEx. The distinction between operating and concession-related CapEx is sometimes artificial. So we have €200 million for operations and €75 million for concessions and PPs, so in total, €275 million.

But the other way around this is true as well. So in net terms, slightly under €200 million. So we have €125 million in net investment, net investments into renewables, including €100 million for Belmonte.

And then we have investments into Brazilian PPPs, for power, transport, but Cobra does not carry the projects beyond the design phase. I hope you understand. I may have is expressed myself, but I hope you understand.

[Operator]

[Operator Instructions]. Your first question comes from the line of Mr. Luis Prieto from Kepler.

[Luis Prieto, Kepler Cheuvreux]

Luis Prieto here. I had three, if possible. The first 1 is regarding the U.S. concession market, the finally went to the plenary consortium. Where does this leave you in terms of future positioning in the country? Are you looking at other potential projects now that the [indiscernible] pipeline seems to be springing back to life?

The second question is that for a good while, you've been talking about a selective approach to order intake on the construction front and how the focus should always be on profitability, but you continue to organically grow the division's top line hands on the margin does not suffer. Is this because most of that top line growth is being driven by inflation? Or is it because the underlying demand environment makes top line margin expansion comparable in construction?

And the third and final question is regarding potential M&A in the energy space. What should we expect? Are there any particular areas or regions you would like to strengthen?

[Unidentified Company Representative]

I'll answer in French. In a minute, I will hand over to Nicola Notebaert with regard to our growth in concession contracts in the U.S., particularly the IT project. I'll take the next 2 questions.

[Nicolas Notebaert, CEO, VINCI Concessions]

Well, what you need to realize is the following. It may seem strange, but in fact, it's the reality of our business, both in construction as well as electrical engineering and communicate. You got 2 major metrics, volume and margin. If you decide to focus on volume, you can get there. It's not very difficult, but you can be pretty much certain that you're going to deteriorate your margins. But if you decide to focus on the margin, by being ready to absorb a loss in market share and the volumes, at that point, what happens is, generally speaking, you can indeed boost your margin, which was the case of our 3 major activities. But cherry on the cake is very often in doing so.

You have, as a bonus, volume. It's not that you saw volume, it's been the upshot of your very rigorous disciplined policy and picking jobs for the margin. That's precisely what's happened at VINCI Construction. And that's why the start of the year, having decided to focus on the margin of VINCI. We had a guidance, a guidance which was volume stability. We implemented that strategy as we did in previous years. We're seeing a margin improvement as a bonus cherry on the cake, we have volume growth that's above inflation.

So once again, growth is coming, but as the byproduct of a product seeking to improve margin. I'm sorry, it's a little complicated. It may seem magical, but that's precisely how it works in our businesses.

On M&A, in the energy world, I'll let Arnaud Grison, answer that while saying that. Regarding Cobra, Cobra does practically no M&A, historically, culturally, Cobra is focused on organic growth and not external growth. M&A happens essentially at VINCI Energy. Arnaud?

[Arnaud Grison, Chairman & CEO, VINCI Energies]

So growth of VINCI Energy rests on two legs organic growth but also external growth. So we do that regularly. We'll continue to do so. We don't seek to expand into geographies. We're present in 57 countries. We're really set to consolidate our geographies and growing our 4 business lines. What we see today is we're looking for small-size deals to integrate them in our network, transmit our values and the complement. We're very vigilant, watchful on the valuations.

We try and answer issues of succession of people who want to have a long-term perspective and join our model. So each and every year, we do a number of deals that there are a number that have taken place so far and will continue in H2 across our business lines, as Xavier said earlier, be geographical strengthening or some strengthening on skills, business industry, information technology and building. So it's a highly fragmented market.

We can still do loads of deals, but as always, the limitating factor is HR because for us to recruit, we have to acquire the talent. It takes time to onboard the people so that we can successfully roll out our model.

I'd add a point before handing over to Nicolas Notebaert, regarding our ambitions, what we're doing in the U.S. on the concession front is on the segment of renewables, our model is, first and foremost, to develop ourselves renewables farms similar to Belmonte, through we do not exclude, rollout if it's a useful price to buy projects that are already producing renewable power.

When it will allow us to enter new geography, we can accelerate our penetration, we do the effort. We buy an existing asset as well as developing from scratch and operate. But the Key of our strategy in renewables not to buy existing capacities, but rather to develop them ourselves like Belmonte. Nicolas?

[Nicolas Notebaert, CEO, VINCI Concessions]

So for the U.S., it's a country where there're fewer concessions as compared to Europe or Latin America. But have some positions in airport, the Orlando Sanford Airport, and some management contracts, such as Hollywood Burbank or a few terminals of Atlanta Airport in Georgia. On the highways, we acquired a company. We now have a position called Via Salis, allows us to do tolling in Texas and California.

So that's a tech dimension that's quite attractive. We're, of course, seeking to pitch-in calls for tenders a collective of Xavier. We analyze a construction offer at the right price, taking into account and traffic and financing outlook as that we won't win every time, but we'll continue to participate, to pitch, searching for construction and joint concessions, greenfield projects, but we could -- rolling out brownfield.

There needs to be some market depth and the size of construction projects that fits our competitiveness and our interest. There are a few projects in the U.S., but we're look each geography, each project side that may meet that ambition, but possibly also there'll be some brownfield possibilities. We look at those systematically, but there're too few as compared to the size of the country today. So we look at them without the certainty and on strategy. We're looking throughout the world, and it would be difficult to talk beforehand say that when it's made public, was made public, we had an offer on the Athens ring road is a [indiscernible] concession.

[Operator]

Your next question comes from Gregor Kuglitsch from UBS.

[Gregor Kuglitsch, UBS]

I hope you can hear me. A few questions. Maybe firstly, on contracting margins from the three different contracting segments margins stepped up by varying degrees in the first half. I want to understand if you think that is kind of the trend that we should be expecting? And then maybe related to that, now that you've owned Cobra for, I think, 18 months, can you give us sort of an updated view what you think the margin potential in this business is considering especially the large EPC contracts. I don't think you've ever really quantified.

The second question is on airport OpEx. I want to understand, to what extent do you think OpEx sort of on the whole will step up perhaps in the second half? I guess it will do compared to the first half, but if you can give us a little bit of a sense how we should be thinking about OpEx?

And then maybe a brief update on the oil and gas assets in Brazil that you kind of inherited, if you've made a strategic decision on those, please?

[Unidentified Company Representative]

Contracting margins, well, let's not dream. Trees don't reach the sky. VINCI and Cobra, Vinci Energy, they're at margin levels that make them European champions without a doubt. Global probability, you'll have seen that for a few years now, this margin has improved slowly, but gradually, our intention is to, of course, continue that. But let's not dream here. Here at one point, it's going to stabilize. We can't be out in front and lead the pack of competitors.

The contracting margin is not yet at the level where we like it to be. And in fact, for that matter, it was a level that we reached a few years back. So the strategy entails what I said earlier. That's to say, to work on selectivity and seeking to improve margins even if it's at the detriment of volume. And in fact, we're seeing that it's not detrimental to volume. So there's still some scope to improve EBIT margin, and VINCI Construction going forward, hold very gradually.

Airport OpEx, Nicolas, anything to say?

[Nicolas Notebaert, CEO, VINCI Concessions]

No worries. On OpEx for H2, most of the contracts are annual contracts, be it terms of employees for our headcount energy. So there's no kind of unpredictability or concern in H2 on airport OpEx. I don't think I recall it. I think you had a third question, I seem to...

[Gregor Kuglitsch, UBS]

Yes. On the oil and gas assets -- the oil and gas asset in Brazil. Sorry to push back on the margin -- sort of to come back on the margins, do you have any comment where you think Cobra could go? Or is that something for the CMD in December?

[Unidentified Company Representative]

Okay. Yes, well, thank you for giving me that opportunity. We'll do a full update on Cobra and in particular, on renewable energy during the CMD set to be held at the end of the year, December this year. So I would refer you to what we might be able to say and discuss on that occasion in far greater detail than today for Cobra regarding its overall margin.

I'll give the same answer that as already given that covered both VINCI Energies and Cobra. Cobra is hence forth above 7% margin. And like VINCI Energy, indeed, is the best in the European indeed, possibly global industry. So it'd be very good if Cobra could generate organic growth for us, whilst maintaing this very good margin level.

[Operator]

Your next question comes from the line of José Arroyas from Santander.

[José Arroyas, Santander]

Just a couple. On the Belmonte solar PV farm, what revenues do you expect these plans to generate on a full year basis? And secondly, on interest expenses, excluding the Gatwick debt refinancing, interest expenses rose by about 90% year-over-year. And we can all see that about 60% of VINCI's gross debt is floating. Is VINCI considering adding more fixed debt at some point?

[Unidentified Company Representative]

Okay. Regarding Belmonte, my answer is simple. We will give you more detailed information on CMD in December. Now with regard to the structure of our debt. I understand the question has to do with financial interest. Financial interest was higher because there was a one-off -- there was a one-off profit of €170 million, and that's not going to happen again. So twice as much over the full year, except for maybe that one-off profit, which is what we factored into our initial budget for 2023, but we may be a little too circumspect.

Obviously, we don't roll out doing that better. With regard to the €400 million increase in H1, half of that is financial interest for debt that we are consolidating for the first time with regard to OMA and Via 40. When it comes to variable rate versus fixed rate debt, our strategy has not changed. The impact of our strategy has been very positive for a long time. It does sound counterintuitive. We find ourselves in unusual circumstances when it comes to fixed rate and variable rate levels, but we're not going to change our strategy because the variable rate debt should match our surplus cash. And for about a year, we have seen an improvement.

It makes sense. An improvement in our cash yield, and part of our variable rate debt matches our EBITDA for airports, in particular, which is broadly inflation indexed. So we're basing ourselves an improvement in our EBITDA. So fixed rates, that would have fixed rate debt, that would have to be long term, but we are seeking to deleverage. And we would find ourselves overhedged. This does not mean we can't have one-off hedges, punctual hedges over the first -- over the next 1 or 2 years.

If in 2024, we are seeing a drop in short-term rates, we may plan to fix or 3 or 6 months [indiscernible] rates, but now is not the time.

[Operator]

Your next question comes from the line of Ashish [indiscernible] with the Citigroup.

[Unidentified Analyst]

This is Ashish from Citigroup. I just wanted to check on Airport segment. So you recently acquired 7 new airports. When do they start contributing to the revenues? That is my first question.

And second is with regards to the margin, we saw good improvement in margin from airport segment. Do we expect that to continue? Or what would be the normal range of margin for the airport segment?

[Xavier Huillard, Chairman & CEO]

Okay. I'm going to let Nicolas collect the start. In the meantime, by definition, in airport is usually . It's an already existing asset. And throughout the concession contract, we will do work to improve the airports environment, but also we will improve airport capacity. So assuming we consolidate that asset, as soon as we buy it, it will start generating revenue and EBITDA. So there's no ramp up. The kind of ramp-up we see for pure greenfield projects, which sometimes happens for highways, but really for airports.

So the second you buy the asset, it starts to contribute to both EBITDA and revenue. When it comes to profit margin, I'm going to let Nicolas explain to you that all airports look alike, rather no 2 airports are the same.

[Nicolas Notebaert, CEO, VINCI Concessions]

Okay. One pressing example with the consolidation of our 29.99% stake in OMA. That is a company the started performing immediately and its performance level actually exceeded our hopes. That portfolio of airports in Northern Mexico benefits from different things, strong domestic growth in Mexico, but also what we call nearshoring. In other words, the U.S. is transferring a lot of its contracting work from Asia to Mexico. There's going to be a Tesla Gigafactory in Mexico. So prorata this has an impact on EBIT and EBITDA. So we invest in 2 companies, which do not have a normative EBITDA or EBIT, of course, that our differences in price.

So gradually, we acquire levels of margin and concession contract lanes that are very different. And of course, this has an impact on price. That, as Xavier was saying, there are very few cases where -- and I have no example in mind, maybe Belgrade or Santiago, where the work is underway, where traffic already exists. There're very few pure greenfield projects in our current airport portfolio.

[Operator]

Your next question comes from the line of [indiscernible] from Cicero.

[Unidentified Analyst]

Two questions, if I may, and 1 remark. #1, just following up on Cobra, I mean the order book looks amazing. The order intake even better, but your output growth is slowing, and I understand the issue here, labor. But as we look forward into Q3, it seems to me that the growth will, once again, like-for-like fall below 10%. So is your 10% growth target somewhat at risk as we look forward? That's the one angle to the question.

And the other angle to the question is given that significant shortage in labor to fill all these orders, could your margins come under pressure at some time -- at 1 point? That's the 1 question.

The second question relates to your cash flow and great job, well done. But like children before Christmas, we have to wait until the end of the year as analysts to see what sort of cash you generate. And I understand the nature of the business, and that's the way it's done. But are there no other ways to smoothen that cash flow to an extent somehow? That's the second question.

And the third point is more of a remark following up on Nicolas. Like him, I travel through Gatwick I've also traveled through Fiumicino and also Copenhagen. I mean I'm afraid I have to say it's like day and night when you go to the other airports and you come back to Gatwick or you leave from Gatwick. And the point of making that remark is that it's facing because it's a freehold asset. And in Copenhagen, you can't sit down here. It's basically a shopping mall as an airport. And there you are in Gatwick, missing a trick in a way. So I just wanted to make that point and see whether that's going to change?

[Xavier Huillard, Chairman & CEO]

Well, I'm going to let Nicolas answer the second question. I'm going to begin by answering your first question, the very significant increase in Cobra's order book. You'll have seen is in large part brought about by the securing of major projects as part of the energy transition, notably the AC/DC conversion stations in the North Sea for German utilities on [indiscernible]. So these are issues instantaneously flatter the order intake and order, but whose rollout is over a very long period. Just to give you an order of magnitude. We got 3 yards where we're building these AC/DC conversion stations. So one, is it Spain, the 2 others in Mexico. These 3 yards currently are saturated in terms of output capacity through the years 2031/'32. So the big order intake flatter the order book, but in terms of activity, will be rolled out very gradually over the long term. Between now and 2030, there's no exact correlation between the order book at given moment in time and the activities as it's rolled out subsequently. That's the first point.

Second point, if we weren't reasonably certain that Cobra could boost its revenue by 10% in 2023, we would not have restated it in our guidance that I set out half hour ago. So yes, Cobra is on a essentially growth trajectory, at least 8% to 10%. That doesn't pose a problem. Then you had somewhat additional question on talents, and if I heard you right, your question was the difficulty in having sufficient employees was likely to negative impact margin.

I'd say it's the reverse. It's the opposite, as to say we don't take a deal if we're not reasonably confident in our ability to deliver it for [indiscernible] stated reasons increasingly, what makes a difference between the various competitors is their ability to deliver. And doing so we can continue to be selective. We pick deals that we're interested on the basis of our ability to deliver them if we win them, but also in our ability to bring to these value added.

So the consequence of all that is that setting our order intake on our ARPU level and taking advantage of the fact that being more exacting on our margin, the talent war that we're in globally has as a consequence that it allows us rather improve our margins on Gatwick. Second piece of flat, Nicolas?

[Nicolas Notebaert, CEO, VINCI Concessions]

Yes, it's actually very different from earlier, we're talking about OpEx. I said less than -- it's less than 1% in the recognized at linked to the actual own missions. And we're doing our job on the OpEx, but it's a highly constrained airport. So no one would understand before the extension plan that I mentioned earlier that we'd sacrifice operational service area because the airport isn't just a shopping mall with a given surface to install even more stores. As we saw, we need to leave space so that the airport can operate for the airlines and their ground handler. So we've identified on the basis of our own experience, far greater and other parts of the network in terms of retail.

And the extension plans, I mentioned earlier, will incorporate more attractive commercial propositions. To date, there are 2 factors that have boosted the proceeds from car parks and food and beverage in terms of the car situation. What works well in airports is car parks and beverage, duty-free was already at a higher level, slightly less Gatwick. Because we've invested in a highly constrained airport. We knew it's going to improve, but when we have the ability to extend that I referred to earlier.

[Unidentified Analyst]

Thank you.

[Unidentified Company Representative]

All right. Yes, cash flow. There's a question why can't we smooth well, why can't we smooth? We can smooth a great many things, but cash flow, it's been difficult to smooth the cash flow. Maybe we can talk to our clients about that. We got the seasonality of our businesses, including concessions that are kind of steadier than contracting more regular concessions.

The cash in depends on traffic and traffic isn't smooth. We're going to have significant cash in VINCI Airports and Autoroutes this summer in the beginning -- it's less the case in the winter. Of course, there's room for improvement.

If you got advice, we're keen to hear that, to bring the clients' cash in throughout the year rather than to go flat out just before the financial close, probably what happens in a number of subsidiaries and constraints in terms of supplier terms. I mean, we are very prompt in paying our suppliers on time, sometimes more than on time, which hurts the WCR. And then There's CapEx, CapEx tend to overestimate them in our budget, not because we don't want to do them, but materially for the same reason that you mentioned a second ago. To operationalized CapEx budgets in actual executed CapEx, we have to have calls and it generally staggers in time.

So all these factors combined means that it's very difficult to have a reliable estimate right down to the final day, week of the year. But of course, I mean we have progress to make. We'll realize that.

Maybe one last question on English French.

[Unidentified Company Representative]

Yes, we haven't heard much of the French. They're a bit limited in their questions.

Well, no last question. Thank you all very much for attending this call for those of you on holiday, have a great holiday. We'll please look forward to welcoming you for another meeting at the CMD for Cobra, Capital Markets Day in December 2023, and in 6 months' time to look at what has happened to the free cash flow for the full year 2023. Thank you all. See you soon.