PARIS (Reuters) - French construction company Vinci (SGEF.PA) reported first-half profit rose 9% thanks to a solid performance from its airports and motorway concessions and affirmed its forecasts for the year, sending its shares higher.
Vinci has been expanding into faster-growing and more profitable concessions such as airports and motorways, as well as engineering projects for the energy industry, to counter weakness elsewhere in the construction sector.
Europe’s biggest construction and concessions company said contract disputes in France and weaker demand in oil and gas-related activities halved first-half profit margins at its construction unit to 0.9%, though it forecast improvement.
“On some construction contracts in France, it has become harder to get clients to agree on price increases and other changes. There are signs of tensions with clients in construction,” CEO Xavier Huillard told a conference call.
He predicted the operating margin for Vinci Construction for the full year would be “close to the 2.8% achieved in 2018, though possibly on the low side”.
Overall, first-half operating profit rose 9% to 2.3 billion euros (£2.11 billion), while revenues increased 10% to 21.7 billion. Vinci shares were up 3.7% in morning trade.
Operating income from Vinci’s concessions business rose 12% in the first half, driven by a 34% jump in the airport segment. Operating income from contracting, which includes Vinci Energies, Eurovia and Vinci Construction, declined 1%.
Vinci, which already runs 45 airports, bought a majority stake in Britain’s Gatwick airport in December for 2.9 billion pounds. Gatwick became part of the group in the second quarter of 2019, helping boost passenger traffic at the company’s airports units 6.7% in the first-half of the year.
Vinci also owns 8% of Paris airport operator ADP (ADP.PA) and has in the past voiced an interest in participating in any future privatisation of the group.
The French government plans to sell all or part of its 50.6% stake in ADP, worth around 8 billion euros, but the plan has faced opposition from critics who are demanding a referendum on the issue.
When asked about his plans for ADP, Huillard replied: “The issue is now awaiting the outcome of the referendum. We will see what we have to do, depending on what the state decides, which hinges on that process.”
The French Constitutional Council said on Tuesday that 615,000 people had signed an online petition backing the referendum. The referendum will take place if backed by a total of 4.7 million people by the first quarter of 2020.
Vinci shares have risen some 25% so far in 2019, beating a 17% gain on Paris' benchmark CAC-40 index .FCHI.
Editing by Deepa Babington