* Bouygues expects 2014 group sales down 1-2 pct
* H1 operating profit falls 61 pct to 134 mln euros
* Bouygues Tel EBITDA falls 29 pct to 332 mln euros
(Adds context on French market, drop in bookings of new homes)
By Natalie Huet
PARIS, Aug 28 French construction-to-telecoms
group Bouygues lowered its 2014 sales forecast after a
weaker than expected performance in the first half, hit by a
price war in telecoms and a slump in public sector orders.
Bouygues, which posted a 61 percent drop in first-half
operating profit excluding exceptional items, said on Thursday
it now expected sales to be 1 to 2 percent lower this year,
compared to a previous forecast of roughly stable revenue.
It blamed tough conditions in France, where a stagnant
economy and austerity measures have weighed on public sector
construction orders and prompted telecom rivals to slash prices
in a battle to retain business.
However, the company confirmed its goal for slightly
positive free cash flow this year at Bouygues Telecom, where it
is losing mobile subscribers but striving to lure in new ones
with cheap Internet, TV and home phone bundles.
Thanks to that strategy and an ongoing cost savings
programme that includes 1,500 job cuts, Bouygues sees the unit
returning to "significant" core profit growth from 2016.
Bouygues also said it was studying options to restructure
the refined products operations of its road-building business
Colas, with job cuts likely there too.
The owner of France's third-largest telecom operator and TF1
, the country's biggest private broadcaster, Bouygues
has been slashing costs to cope with a bitter telecoms price war
sparked by the 2012 launch of Iliad's low-cost Free
The cut-throat competition has eroded profit margins and
fuelled talk of consolidation among the country's four mobile
players, with Bouygues Telecom a potential takeover target since
it lost a bidding war for bigger rival SFR in April.
Chief Executive Martin Bouygues played down market talk of
further mergers and acquisitions in French telecoms, saying
there had been no new developments in recent weeks.
Bouygues Telecom has been working to strengthen its future
as a standalone player. It is cutting 17 percent of its staff
while rolling out its very high speed 4G network and slashing
prices in fixed broadband, which brought in 400,000 and 102,000
new customers respectively over the quarter.
However, Bouygues Telecom's aggressive pricing strategy in
fixed broadband did not bring in enough new clients over the
period to offset the rise in related marketing costs and the
switch of existing customers to its lower tariffs.
The unit's earnings before interest, tax, depreciation and
amortisation (EBITDA) fell 29 percent to 332 million euros ($438
million), as sales dropped 5 percent to 2.2 billion.
In its construction and road-building business, which
accounts for around two thirds of revenue, Bouygues said it had
seen orders fall 2 percent in France, though this was offset by
a 9 percent rise abroad.
Like rival builders Vinci and Eiffage,
Bouygues said French public-sector orders, especially at Colas,
had dried up around municipal elections in March and the
slowdown was "a point to watch" for the remainder of the year.
Chief Financial Officer Philippe Marien did not specify how
many jobs would be cut at Colas, but said the division needed to
cut staff at its Dunkerque site, which employs around 250
Bouygues also saw bookings of new homes drop 23 percent in
the first half. Martin Bouygues urged the government - freshly
reshuffled and due to unveil a housing stimulus plan in the
coming days - to bring confidence to buyers and investors tired
of constant shifts in regulations and tax rules.
Bouygues' operating profit fell 61 percent to 134 million
euros in the first half - excluding a 308-million gain from the
sale of a controlling stake in sports channel Eurosport - as
sales edged up 1 percent to 15.18 billion. That compared with
average estimates of 178 million and 15.07 billion respectively
in a company-supplied poll of eight analysts.
Bouygues shares were down 0.5 percent at 1155 GMT, after
falling as much as 2.8 percent in morning trade.
(1 US dollar = 0.7572 euro)
(Additional reporting by Gilles Guillaume; Editing by Pravin
Char and Tom Pfeiffer)