PARIS (Reuters) - An improved performance from its telecoms business helped French conglomerate Bouygues (>> BOUYGUES) to beat operating profit forecasts last year, strengthening its hand in merger talks with larger rival Orange (>> ORANGE SA).
The company said on Wednesday that discussions about a possible combination of Bouygues Telecom, France's third-biggest mobile phone operator, and market leader Orange (>> ORANGE SA) were continuing.
"Bouygues attributes great importance to the interests of Bouygues Telecom's employees and to the sector's investment momentum, which must remain strong in the interest of customers," Bouygues said of the talks.
The family-controlled group, which also builds roads and owns France's biggest private broadcaster TF1 (>> TF1), said current operating profit reached 941 million euros (741 million pounds) last year, up from 888 million in 2014. Analysts polled by Reuters were on average predicting operating profit of 852 million euros.
Orange has been in talks since early January to buy Bouygues Telecom for about 10 billion euros in cash and shares in a deal which would make Bouygues the second-biggest shareholder in Orange after the French state.
Bouygues Telecom, which has been hit by a price war in France since the arrival of Iliad (>> ILIAD) in 2012, has been pursuing a turnaround plan including staff cuts and a focus on the rollout of its speed 4G network and the fixed-line broadband market.
Group sales totalled 32.428 billion euros, down 2 percent from a year earlier, as a weak construction sector in France weighed.
The current operating margin reached 2.9 percent of sales against 2.7 percent a year ago, thanks to stable profitability at the construction business, and improved profitability at TF1 and Bouygues Telecom.
Bouygues said it expected its construction business, which makes the bulk of group sales, to start improving profitability in 2016. The construction sector's operating margin remained stable at 3.2 percent in 2015, with the order book up 5 percent to 29 billion euros, driven by international operations.
Bouygues Telecom's earnings before interest, tax, depreciation and amortisation (EBITDA) came in at 752 million euros in 2015, in line with the company's goal for about 750 million, and up from 694 million in 2014.
Sales rose 2 percent to 4.505 billion euros. Bouygues Telecom also confirmed its long-term targets for sales and profit growth.
Bouygues shares were up 1 percent at 0825 GMT.
(Editing by Tim Hepher and James Regan)
By Dominique Vidalon