Four things we learned from Vinci’s H1 2023 financial results

Image: Vinci

One of the world’s biggest construction contractors and the largest in Europe, France-based Vinci, has recorded an 11% increase in revenue across the group to €14.9 billion for the first half of 2023.

Meanwhile, operating income over the period jumped to €3.5 billion, a 26% increase on the same period a year before.

The group splits itself into several different divisions: Its Concessions business, which operates and manages assets like airports and motorways around the world; its Construction arm; Vinci Energies, which specialises in energy, transport and communication infrastructure as well as buildings, factories and IT systems; and Spain-based Cobra IS, which has experience in industrial engineering and specialized services in sectors including energy, industry, telecommunications and mobility.

The order book in three of those divisions – Vinci Energies, Cobra IS and Vinci Construction – hit a record high of €61.5 billion at 30 June 2023, up 7% on 31 December 2022.

But beyond the headline numbers, what else can the most recent set of results at Vinci tell us about the construction giant and wider trends within the construction industry?

Here are four things we learned:

1) Vinci is betting big on the digital and energy transition:

The company’s chairman and chief executive Xavier Huillard noted that “powerful megatrends” related to the energy transition are driving Vinci’s energy business.

Both Vinci Energies and Cobra IS enjoyed a strong performance in the first half of the year. The revenue the two generated together amounted to €12.2 billion, up 16.9% compared with first half of 2022.

And to capitalize on those trends, Vinci Energies acquired 14 companies in the six months to 30 June 2023, adding on full-year revenue of around €280 million.

Included in the acquisitions were Norwegian company Otera which designs, builds and maintains electricity transmission and distribution networks as well as road infrastructure and tunnels. It also bought French company Methalac, which designs, builds, maintains and monitors anaerobic digesters.

Other companies on the list included Avanceon, based in Pennsylvania USA, which specializes in systems integration and industrial automation, and Elecso, a Quebec-based company specializing in electrical systems and instrumentation for infrastructure and industry. French railway signalling group SITS also joined the group.

Cobra IS’s order intake jumped by 64% over the period to €5.3 billion, driven by large contracts for renewable energy production projects. Among those was a €2 billion deal, won in January 2023, to design, build and install two offshore windfarm energy converter platforms in the North Sea with a total capacity of 4GW.

Order intake at Vinci Energies was €11.1bn for the first half of 2023, up 21% compared to first half of 2022, helping it to reach a new record on a 12-month rolling basis.

2) Margins in Vinci’s construction business show signs of coming under pressure:

Back when it published its full-year results for 2022, Vinci hit an Ebit margin of 3.8% in its construction division. That came off the back of €1.1 billion operating income on revenues of €29.3 billion.

At the time, Vinci noted that the 3.8% margin was the highest level for its construction business “for many years” and that it had managed to deliver it in spite of high inflation.

However, its results for the first half of 2023 show that the construction business’s Ebit margin has fallen back, at least for now. It was a slimmer 2% for the period, with the construction business generating €299 million in operating income from revenue of €14.9 billion.

But Vinci said that the level of Ebit margin in construction was “not representative of expected full-year performance”.

It said business levels in infrastructure were “firm”. In the building segment, business was driven by rehabilitation projects in residential sector and construction of public buildings, particularly hospitals.

In its outlook, for the rest of the year, it predicted further business growth while remaining selective on taking on new business, which it said would allow it to improve its operating margin.

Vinci is working on the Grand Paris Express project in France (Image: AdobeStock - stock.adobe.com)

The business has recorded some major contract wins that fell after the half year, including a €2.7 billion deal involving several subsidiaries of Vinci Construction and Vinci Energies for the first design-build contract as part of the massive Grand Paris Express project.

By contrast to construction, Vinci Energies’ Ebit margin for the half year to 30 June 2023 rose to 6.8%, compared to 6.5% in the same period a year before. At Cobra IS, Ebit margin was 7.5% (up from 7.1%).

3) Vinci is starting to build hydrogen mobility infrastructure:

Earlier this year, Vinci Concessions completed an investment in French taxi company Hype.

Hype runs a fleet of taxis powered by hydrogen fuel cells and the two companies have entered a partnership to accelerate the deployment of hydrogen mobility infrastructure.

That construction programme will start with the construction of hydrogen production and distribution facilities in the greater Paris area, including 26 refuelling stations which will open to the public within the next three years.

But Vinci said in its results that Vinci Concessions, with the assistance of Vinci Energies’ expertise in hydrogen, would start to use its resources to deploy stations across other regions of France and around the world.

Separately, Vinci Autoroutes is working with Vinci Construction on a new initiative to help decarbonise road transport. On the A10 motorway in France, two dynamic charging solutions primarily for heavy electric vehicles, one using inductive charging and the other using conductive rail charging, will be trialled on two 2km sections over three years.

4) Markets outside France driving bulk of growth:

International business accounted for almost 56% of Vinci’s total revenue, with the rest coming from its home market of France.

That was an increase on 2022 when 53% of Vinci’s revenue came from overseas.

In the first half of 2023, revenue in France was €14.4 billion up 6.8% on the same period the year before. Outside France, it was €18 billion, up 19.5%, although this was driven partly by acquisitions in Europe and North America.

Meanwhile, international business made up 69% of Vinci’s €61.5 billion order book at end June 2023.

Outlook

Vinci said it expected a further increase in revenue and operating income in 2023, although this would be more limited than in 2022.

It forecast a net income slightly higher than the level achieved in 2022, despite an increase in financial costs.

It predicted that its Vinci Energies business would see further growth, spurred on by positive trends in its markets and the integration of recent acquisitions.

It said it also expected Cobra IS to grow revenue by at least 10%, driven by the ramp-up in large EPC contracts won recently.

And it forecast that Vinci Construction would see further business growth while remaining selective in taking on new business.