Xavier Huillard,
Chairman and CEO, VINCI
“THE NEED TO TACKLE THE CLIMATE EMERGENCY RIGHT NOW HAS TURNED THE LONG-TERM FUTURE INTO A SHORT-TERM CONCERN. THE PROSPECTS THIS IS OPENING UP FOR A GROUP SUCH AS OURS ARE MORE TANGIBLE, AND MORE ENORMOUS, THAN EVER BEFORE.”
How would you describe VINCI’s performance in 2023?
It is solid. We moved forward on our virtuous growth path despite the uncertainties in our economic environment and the geopolitical situation. We increased our revenue, our operating income and, notwithstanding significantly higher financial costs, our net income. Our free cash flow, which had broken a record in 2022, rose substantially again in 2023, giving us more latitude to press ahead with our development.
These accomplishments are the hallmark of a group that is well run and has an organisational and management model that facilitates each company’s and each team’s performance on the ground. We are agile entrepreneurs, and this gives us a valuable advantage in times of radical change. Our business model also makes us resilient. We have been reinforcing our model constantly and consistently since VINCI’s inception, and can see exactly how relevant it is today: our three main fields of expertise – in mobility concessions, in energy and in construction – place us where the answers to the contemporary world’s problems are emerging. All this shines through our current performance and, even more so, our growth prospects. We are also strengthening our resilience by diversifying geographically: our vigorous international expansion has increased our revenue outside France from 37% of the total a decade ago to 57% in 2023.
Are the effects of the health crisis on concessions behind you now?
Yes, definitely. We have seen a strong upswing in our airport activity. Passenger numbers at VINCI Airports as a whole are practically back where they were in 2019, and its 2023 results are its best ever. So the business line is actually stronger now than before the health crisis. Our track record here is a good example of our ability to update our model: we were a marginal player in this market 20 years ago and are now the world’s leading private operator in the sector – with a network spanning more than 70 airports in 13 countries. Traffic on VINCI Autoroutes’ motorways in France inched up even though the economic situation took a turn for the worse, showing that roads remain predominant in the country’s transport system. And we continued enlarging our road infrastructure network outside France in 2023: we moved into Brazil and grew in Europe through the projects we are working on in Germany and the Czech Republic.
VINCI is also pursuing a vigorous expansion policy in its Energy business. What did you achieve there in 2023?
Energy is another example of a side business we have built into a world-class player. In this case through a combination of VINCI Energies’ remarkable development over the past two decades and the acquisition of Cobra IS, which joined us at the end of 2021. Organic growth in this business amounted to almost 13% in 2023, and its revenue is on its way to catch up with that in our longest-standing business, Construction. As their expertise covers every stage in electricity production, transmission, distribution and use, VINCI Energies and Cobra IS are tapping into the full potential arising from the energy transition. We are also becoming more involved upstream and downstream of this value chain, i.e. financing, developing and operating renewable energy production plants – for instance the São José do Belmonte photovoltaic megacomplex in Brazil, which we commissioned in July 2023. Looking at the bigger picture, the fact that the energy transition and digital transformation are gathering momentum is opening doors for VINCI Energies and Cobra IS beyond the energy infrastructure market, in sectors dealing with the same issues, which range from industry to buildings and on to information technologies.
How did VINCI Construction, the Group’s business line with the highest revenue, perform?
VINCI Construction concurrently increased its revenue, in particular outside France, its Ebit margin, which is near its all-time high, and its order intake, even though it remains extremely selective. It achieved all this thanks to its good results in its core business in its main geographical strongholds, its ability to handle some of the biggest projects under way around the planet, and the world-leading expertise in its specialty networks.
Our building companies are also seeing a growing inflow of projects relating to the energy and environmental transition. They are for example working on low-carbon public transport infrastructure programmes (such as the Grand Paris Express in France and the HS2 high-speed rail line in the United Kingdom), civil engineering works for hydro and other renewable energy infrastructure (including pumped storage power plants), and climate resilience structures. Two trends are converging in the construction sector: the need to address energy-related issues and the need to transform the places where we work, live and engage in community life, in order to accommodate evolving practices. Both are generating a steadily rising proportion of renovation projects.
These trends are also buoying our property development arm, if we take the long view. We are of course weathering a severe downturn in the French property market. But we are also establishing VINCI Immobilier as a go-to developer for land recycling operations, to prepare for the rebound in coming years, while adapting our organisations, products and services to manoeuvre through the current headwinds.
What are your medium-term prospects looking like?
The trends at work in our markets today will continue: the driver in Concessions will remain demand for mobility, which is higher than ever worldwide; in Construction it will be the constant need to renew infrastructure, buildings and urban spaces, which is showing in the fact that our order book is as full as ever; in Energy it will be the transition to low-carbon sources and the massive shift to electricity in every sector of the economy.
We expect these trends to sustain our growth over the next few years. And our financials are solid, so we are in a comfortable position to keep on rolling out our development strategy. These trends will also give rise to considerable opportunities, because all our businesses have a prominent role to play in the mother of all battles – the one to curb climate change. The need to tackle the climate emergency right now has turned the long-term future into a short-term concern. The prospects this is opening up for a group such as ours are more tangible, and more enormous, than ever before. These overlapping time horizons were what prompted us to recast our environmental policy at the beginning of the decade. We did that with two goals in mind: to reduce the direct footprint of our activities and, most importantly, given our business lines’ substantial impact, to actively advance the energy and environmental transition of living environments, infrastructure and mobility.
Precisely: how are you supporting the ecological transition right now?
With our strategic moves – for instance strengthening our Energy business to play a significant role in meeting rocketing demand for low-carbon electricity infrastructure – and, at the same time, through deep transformation within our own business lines and across our solutions. In our Construction business, we are already cutting carbon emissions, reusing materials and improving energy performance to bring passive buildings closer within reach. For example, we are on track to meet our ambitious objective of using 90% low-carbon concrete at our worksites by 2030.
In our motorway concessions, we have high-power charging stations for our customers at all VINCI Autoroutes service areas, to help encourage long-distance travel in electric vehicles. We are also trialling dynamic charging for heavy vehicles, using induction systems and charging rails on our network, to help develop technologies that lower carbon emissions from road freight. Our airports are already well on their way to net zero emissions, thanks in particular to the on-site solar power plants they have been setting up. And we are working with partner airlines and large industrial groups on alternative fuels – biofuels initially, hydrogen eventually – to decarbonise air travel.
So we have wholeheartedly embraced the ecological transition. Even more importantly, we are determined to step up the pace, with all the partners in our ecosystem, to achieve carbon neutrality by 2050 in line with the pledges that France, the European Union and most countries worldwide have made. Reaching that goal will require considerable investment in transport infrastructure and energy grids. And government budgets will not be enough, so public-private partnerships will necessarily be part of the answer. This is another reason why our long-standing model combining concessions and construction and the short and long term is the right one.
To sum up, what is your view on these sea changes?
We have entered a period that will lastingly benefit our businesses. So we have the peace of mind we need to move forward confidently and decisively. The notion of all-round performance, which has always been our compass, is more meaningful than ever in light of the challenges facing the world today. So we will continue our virtuous growth journey, striving to develop our companies and empowering our employees to thrive while serving as a force for good by protecting the planet.