“Well, we’ve arrived at the Chateau de Versailles,” announces the cab driver, visibly taken aback by the grand scale of Bouygues’ headquarters in the outskirts of Paris. The glass and steel building, dubbed Challenger, is an imposing monument. Equestrian statues and palatial basins complete the picture of a company that is confident in its achievements and place in the world.
And that place is as the second biggest contractor in Europe. With a turnover of €22bn (£15.4bn), 125,000 employees and an empire that comprises the television channel with the highest audience rates in France, the country’s third largest mobile phone provider, property development, roadways and services units as well as the minor matter of a construction division, Bouygues is a grandiose operation.
Historically, it is perhaps even more important than its great rival Vinci. The company, founded by Francis Bouygues in 1952, has built many of the most prestigious French projects of the past few decades. This is a point Yves Gabriel, Bouygues Construction chairman and chief executive, is keen to emphasise: “We have been the builders of almost all the landmark projects in Paris and the Ile-de-France – La Grande Arche de la Défense, the Louvre, the Musée d’Orsay, the Stade de France (in partnership with Vinci) and at the moment Jean Nouvel’s Musée des Arts Primitifs on the Quay Branly in Paris.”
It is not just in France where Bouygues has made its mark: the group has a beachhead in Blighty. In the next few weeks, it will have completed the Home Office’s £179m PFI headquarters, two months ahead of schedule. The company will receive €18m (£12.6m) a year in maintenance fees during the 26-year contract. This will add a British gem to the crown of Bouygues Construction, which made a turnover of €5bn (£3.7bn) in 2004 and employs 40,000 people in 60 countries.
No wonder the healthily suntanned, well-groomed Gabriel is smiling. An engineer by training, he has worked for Bouygues since 1976 and has held his current job for more than two years. He has carefully followed the objectives of his boss, the Bouygues Group president and founder’s son Martin. The Bouygues boy has been criticised for diversifying the business, but it seems that not being a pure construction player is now paying off.
“We try to make a difference by offering services that add up to more than the construction activity,” says Gabriel. A 12,500-capacity sports arena in Budapest is a good illustration of a strategy that integrate all the stages from conception to delivery: “We’re doing everything there. We are responsible for the conception, the construction, the maintenance of the arena, the artistic programming, the finances.” Bouygues Construction is increasingly moving towards service activities to complement its building revenues. In Hong Kong Bouygues is working on the International Exhibition Center, dealing with financial and legal set-ups and managing and operating the exhibitions. “A lot of contractors are able to perform the same technical skills as us, but we are adding another dimension to our work,” says Gabriel.
The pfi system has been remarkably well organised in the uk
This approach is playing a central role in Bouygues’ strategy in the UK, where it is eyeing up a number of PFI contracts. Besides the Home Office, last year it completed the £58m West Middlesex Hospital and will manage it over 35 years through its facilities management arm, Ecovert FM. “I think the PFI system has been remarkably well organised and structured in the UK as far as the building sector is concerned. We now have a good knowledge of the market and a strong image and will consider putting the emphasis on hospital, schools and public works.”
The larger strategy of the group is to develop four of its newer divisions. “Our main targets are the electricity and maintenance activities,” declares Gabriel. From €500m (£350m) in 2002, the group’s electricity profit reached €735m (£515m) last year. Gabriel predicts this will break €1bn (£700m) by 2006.
Bouygues Construction also places high expectations on creating property development operations from scratch and exporting them in Europe through specialised subsidiary companies. This objective centres around public and private partnerships following the success of the British model. Finally the group intends to win more concessions work.
Still smiling, Gabriel makes the inevitable, albeit charmingly put, sales pitch that his company is in good shape: “With our very good results and exceptional financial structure, we are able to consider the future growth with serenity.”
Walking outside Challenger to have his picture taken, Gabriel remarks playfully that the Vinci headquarters do not boast such grand water basins. When informed that the pictures of Ratynski were taken by a picturesque stream, Gabriel laughs: “If he’s in front of a stream, then I will have to be in front of a river.”
Vinci and Bouygues’ SWOT analysis
Philippe Ratynski, chairman and chief executive of Vinci Construction: “We have a model management that is well adapted to the job and the zeitgeist, a dense network throughout Europe and good synergy with concessions companies.”
Yves Gabriel, chairman and chief executive of Bouygues Construction: “Bouygues has an international reputation for prestigious projects and huge technical skills, the ability to master large complex projects, development and financial engineering. We are a big international exporter with the ability to innovate.”
PR: “A presence which is essentially European … but is that really a weakness? We are insufficiently involved in the development of large buildings outside France. We are well versed in assembling complex operations, but not the large-scale production of entire cities – Bouygues knows how to do it better. As we are not a property developer, we can be limited in certain operations. Skanska does that better.”
YG: “Our geographical distribution – 58% of our activity is based in France. We are not strong enough in Europe yet, especially as we should consider the new European Union countries as our domestic market. Our local subsidiaries have a limited presence.“
PR: “Reinforcement in central Europe. There are also a lot of oil developments in which we have no presence and from which we could make a very large profit.”
YG: “Expansion in Europe and beyond, to Russia or Serbia for instance; developing further our model of services providers.”
PR: “Chinese competition, which is quite distressing as they are on all the bids. It’s hell – 90% of the dams in the world are Chinese, which gives you an idea of where we stand in the world.”
YG: “The European market is now open to bids from all contractors. Elsewhere in the world, Chinese, Korean and Turkish companies are direct competitors on international bids. This creates an issue about standards, because they don’t use the same work methods.”