Spie Sa Ord

Hello and welcome to the SPIE half-year 2024 results call. My name is Jess and I'll be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. This can be done by pressing star 1 on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero and you'll be connected to an operator. I will now hand over to your hosts, Gautier Louet, Chairman and CEO, and Jérôme Vanhoef, Group CFO, to begin today's call. Thank you.

Good morning, ladies and gentlemen, and thank you for attending our conference for H1 Results 2024. As you know, today is a very special day in Paris with the opening ceremony of the Olympic Games. And speaking of Olympic Games, on page 3, we recently installed a high-voltage substation at the Parc des Princes for the Paris municipality. The goal is to ensure electrical supply for incoming events while minimizing diesel generator usage. Carbon emissions will be reduced by 90% for events such as football matches through direct connection to the electrical grid. And on that same note, on page 4, SPIE has also been a key actor of the Plan Béniade aimed at improving water quality of the Seine River in Paris. We provided a wide range of electromechanical services across three shafts of a 600-meter-long siphon located under the Marne River, a tributary to the Seine. This work is crucial to prevent overflow during heavy rain and to stop the discharge of untreated water into the river. On Site 5 in Austria, SPI works on the upgrade of the electrical systems in five tunnels along the A10 highway. Our team is leveraging its expertise on this project by modernizing these tunnels with the installation of 800 kilometers of new cables for Asfinag, one of our major customers in Austria. It does reinforce SPI's position as a leader in complex technical upgrades and our commitment to creating better and safer transport networks. Site 6 in Hamburg. We are extending our long-standing partnership with Lufthansa Technik for another four years. Our team will continue to provide essential technical services, ensuring the smooth running of this critical aviation facility of 500,000 square meters, composed of 85 buildings. This renewal is really good for SPIE. It demonstrates our expertise in managing complex infrastructure and the quality of execution of our teams on the field. We have more than 150 people on these premises. And finally, on slide seven, let me present our involvement for EDS nuclear energy program. We are part of a consortium for the supply and station of diesel backup generator for the new six EPR2 nuclear reactors, which will be built across three sites in France. This project will span over 17 years and it will contribute to France's energy sovereignty and low-carbon electricity production. We are going to bring our expertise in ventilation systems, pipework and fire protection to ensure the safety and efficiency of these facilities. Throughout this project, we affirm our commitment to France's energy future and our position as a key player in the low-carbon nuclear sector. Now moving to our financial performance for the first half of the year on page 9. We did deliver another very strong performance. Our organic growth reached a high level of 5.8%. Our EBITDA margin increased by 30 basis points to 5.6% of revenue. We did pursue intense Bolton acquisition activity to further improve our geographical balance. This year, for the first time, Germany will be the first contributing country of the group, both in terms of revenue and EBITDA. This very strong H1 2024 enables us to firm up our guidance to an EBITDA margin of at least 7% of revenue in 2024. A bit more detail, our revenue reached 4.7 billion euros, an all-time high for the first half, on the back of a revenue growth of 14.4%, of which 5.8% was organic and 8.3% from acquisitions. EBITDA was up nearly 21% at 2,066 million euros. Our intense Bolton M&A led us to a 245 million euros of additional annual revenue, with two acquisitions signed in Germany in H1 and two more acquisitions announced in July. Our leverage ratio was up by 0.1 times compared to H1 2023, reaching 2.4. Looking on slide 11 to our growth per geography, We did enjoy a dynamic organic growth across all our segments. Northwestern Europe and Germany were leading the way at respectively 8.3 and 6%. Central European countries did perform very well, while Switzerland continued to be impacted by very challenging comparison basis. France's performance remained solid. Global services Global Energy Services recorded an exceptional level of organic growth at 29.3%. The impact from acquisition was particularly noticeable in Germany at 24.6%, notably with Bridging IT and Robo. It was also significant for Global Services Energy with 11.5% following the acquisition of Corel Group. Now moving to our EBITDA margin on slide 12, we enjoyed a significant 30 basis point increase with improvements across the board. France continued to increase by 10 basis points. Germany significantly rose by 50 basis points with the accretive impact of our recent Bolton acquisitions, the positive mixed effects from our T&D activities, and the ongoing quality of execution. North-western Europe materially increased by 50 basis points with a favorable mixed effect in the Netherlands, while Belgium keeps improving gradually. Central Europe recorded the highest improvement, as much as 60 basis points, thanks to the quality of execution, the strong pricing power in some markets like our T&D activities, and the outstanding performance in Austria. Global services energy remained at a high level of margin at 8.4% of revenue. Giving a bit more color per segment, starting with France on slide 13, we recorded an organic growth of 2.1% and the EBITDA margin increased by 10 basis points. This organic growth was solid considering the challenging comparison basis of last year. In tech FM and building solutions, activity continued to be driven by energy efficiency solutions, including energy performance contracts. Industry services, driven by decarbonization and electrification projects, remained resilient. City network was supported by smart public lighting solutions and public transport, while revenue from fiber activities decreased as expected, but it did remain well contained. Finally, growth in nuclear services remained constrained in H1. We will expect in due course the first contribution of the new nuclear program, following the new order for diesel backup generator I just described in my introduction. In Germany, Slack 14, the remarkable 30.6% revenue growth in H1 included a strong 6% organic growth and nearly 25% growth from Bolton acquisition contribution. It does show the success of the strategy implemented over the last 10 years. As I said, Germany becomes this year the largest contributing country for SPI, both in revenue and EBITDA. And I don't need to remind you that this is the biggest addressable market in Europe. one and a half times the size of the French market. Talking about our acquisition, Robo, by setting up of industry services activity in the country and ICG reinforcing our city networks and grid activity are performing well and they materially contribute to the 50 basis point increase of EBITDA margin in Germany in H1. The integration plans are progressing well as The other key drivers for the EBITDA margin increase are the positive mixed effect from our T&D activities and the quality of execution across the board. And last but not least, the strong 6% organic growth was mainly driven by high-voltage city networks and grid activities. Germany needs to expand the capacity of the grids and to deploy smart monitoring systems to connect Many renewable energy sources spread widely across the country. Slide 15, Northwestern Europe. We recorded an 8.3% organic growth and an excellent 50 basis point EBITDA increase. In the Netherlands, the strong performance was driven by high-voltage activities, renovation of bridges and locks, transformation projects in decarbonization, electrification, and digitalization, with blue chip customers. Belgium was supported by investment made in high-voltage and by building solutions with renovation contracts for existing facilities. And overall, Northwestern Europe was still at an exceptional level of organic growth in H1. In Central Europe, slide 16, we recorded 3.2% organic growth and as much as 60 basis points EBITDA increase. Switzerland organic growth was in negative territory following the strong catch-up of the supply chain delay in 2023. This challenging comparison basis should last until the end of the year. Elsewhere in Central Europe, we did so a very strong momentum, especially in Austria, where our markets were bolstered by tunnel and transportation infrastructure projects, as illustrated at the beginning of our presentation, and in Poland, where works for high voltage grids and modernization of public lighting were very dynamic. And finally, on slide 17, Global Services Energy recorded an exceptional 29.3 organic growth and a 30 basis points EBITDA increase. We did benefit from the ramp-up of several pluriannual contracts in our traditional operations and maintenance activities, and also from the contribution of a shutdown operation offshore sub-Saharan Africa already observed in our Q1 24 trading update. Within the segment, we launched a wind power business unit following the acquisition of Coral Group. The integration process is well on track and we foresee strong business opportunities in the offshore wind market going forward. With regard to our Bolton acquisition activity, it has been intense over the beginning of the year, as evidenced by our 80.3% external growth in the first half and already two deals recently announced for H2, Otto in Germany and Horus in France. We successfully completed three acquisitions in Germany in selected areas of expertise, totaling 320 million full-year revenue, starting with HCG, leading player in telecommunication infrastructure, including fiber 5G networks with good growth perspectives and attractive EBITDA margin. MBG, a provider of EPC services for photovoltaic rollout, mainly for rooftop installation on buildings. And finally, OTO, recently announced, which is a provider of engineering, procurement, and installation for pharmaceutical and biotech production facilities. The company has a very unique know-how and a strong track record in the sector, providing an outstanding level of profitability, the EBITDA margin being above 20%. This acquisition will be integrated by different business units of our German organization, thus spreading evenly the management efforts. And we also announced this week the acquisition of Horus, in the robust nuclear services sector in France. He's a leader and an expert in non-destructive testing, such as X-ray testing, MPI inspection, or ultrasonic testing. These acquisitions are contributing to the expansion of the group service offering and footprint density, which is at the core of our growth model. Now we'll hand over to Jérôme, who will comment on our financial performance.

Thank you, Gauthier, and good morning, everyone. I'm on slide 20 with the highlights on our income statements. These key figures underscore the very strong financial performance of SPIE in the first semester. I would particularly point out €4.7 billion of revenue with a high level of organic growth at 5.8%, €266 million of EBITDA, a strong 20.7% increase compared to H1 2023. It is the result of the combined effect of a top line growth of 14% and a significant margin increase of 30 bps, as it has been said. The adjusted net income stood at 158 million euros, up by nearly 29%. Moving to the revenue bridge, I'm on slide 21. We've recorded a total revenue growth of 14.4% in the first semester, of which a high level of organic at 5.8%, still benefiting from an inflation effect at a lower level. A plus 8.3% change in perimeter effect, representing around €335 million of additional revenue in H1, coming from the acquisition of last year for €116 million, notably with Bridging IT, and from the new acquisitions of this year, notably Robur, Corel and ICG for a cumulative amount of €220 million roundabout. Finally, a negligible net currency effect of 0.3%. On slide 22, the bottom part of our P&L evidence is a strong increase of our adjusted net income at 157.6 million euros, a remarkable rise of nearly 29%. This is driven by, of course, the strong EBITDA performance in H1, plus 21%, as mentioned earlier, a rather stable financial cost with net interest and other financial charges being well-oriented, and thanks to a large portion of our gross debt being at fixed rate, while we benefited during the first semester from a better remuneration on our gross cash. Finally, on the income tax, our normative tax rate is at 28.2%. This is 100% basis point lower than in H1 2023, but this is in line with the normative tax rate retained at year-end 2023. Now on slide 23, looking at the bridge of our net income to the adjusted net income, I would like to highlight a few points. the impact of recent companies being acquired, which translates into an increase of the amortization cost of allocated goodwill at 58 million euros in the first semester compared to 36 million euros in H1 2023 due to new consolidated acquisitions. The limited cost of integration and restructuring at €0.3 million in H1. We clearly do anticipate higher integration costs in the second semester of this year, in line with the ramping up of integration processes, notably in Germany. Acquisition costs in accordance with IFRS 3 for an amount of €6.4 million. and €5.7 million EBITDA contribution from two recent acquisitions, namely ICG and MBG, not yet consolidated at the end of June 2024. These two acquisitions, these two companies, will be consolidated before year-end and duly reflected in our full-year consolidated financial statements for 2024. Given the material... profit generation from ICG together with ING during this first period of the year. It legitimates their inclusion in revenue EBITDA and adjusted net income in our presented management accounts. Regarding the other items of this bridge, we adjusted the non-cash 53.8 million euro charge related to the Ornan that I will detail on the next slide. €8.1 million of non-cash IFRS 2 charge, as usual, linked to our long-term incentive performance plan. And finally, the implied tax adjustments based on the normative tax rate at 28.2%. As said, I'm coming back on the Ornan and especially the accounting treatment related to such convertible bond in accordance with IFRS. This semester, we recognized 53.8 million euros non-cash charge as said. In practice, this amount is split between A, the amortization cost of the derivative instrument, this is a steady charge over the period, 4.5 million euros in H1, And the impact of the change in fair value of the derivative instrument component of the Ornan recorded for 49.3 million euros in our P&L, again, a non-cash charge. This is directly related and in line with the increase of our stock price, notably at June end. the stock price being the driving factor of this fair value assessment. In the balance sheet, at the end of June 2024, the derivative component of our Ornan is consequently revalued up at 89.3 million euros, As you all know, the attractiveness of these Ornan instruments lies in its long maturity, first up to 2028, its fixed coupon, only 2%, and its low dilution potential as the conversion in cash or in share at exit, as you know, remains at speed, hands, and options. Moving to our working capital performance, we confirm again the usual entire seasonality of our working cap. As of the 30th June 2024, our working capital represents a negative 457 million euros, which is the equivalent of negative 17 days of revenue. And it would even be negative 21 days at the end of June of revenue, if we exclude especially the first consolidation impact of the recent acquisitions and notably rebours. This is an excellent performance in line with our historical seasonal pattern and reflecting our very strong permanent discipline regarding invoicing, cash collection and all the related process across the board. Moving to slide 26 and the free cash flow, as already mentioned, our usual working capital seasonal pattern translates into a negative free cash flow each first semester. But it is worth mentioning that our operating cash flow has significantly improved at the minus 79.9 million euros, but compared to more than negative 200 million euros in H1 2023. And this achievement reflects the excellent performance of our EBITDA and the lower seasonality of the working cap in this first semester 2024. Our tax cash out amounts to 78.8 million euros in H124. This is up compared to last year. Two reasons for that. First, the growing group's taxable profit basis, obviously, both organically and from external growth. And secondly, I remind you that we benefited from a one-off tax deferral at the end of December 2023 that we pointed out at that time, which is now almost entirely cashed out since that date, representing nearly 20, 25 million euros. This good performance of EBITDA in working cap cascades to our free cash flow in H1 with clearly lower cash consumptions by nearly 100 million euros in comparison to the previous year. Finally, as per Our capital allocation policy fully self-financed its M&A activity, which translates into 722 million euros cash out in H1. Thus, in the end, a total change in our net debt over the first semester of minus 1 billion and 42%. million euro this leads me to directly move on to the leverage ratio slide 27 our leverage ratio excluding ifrs 16 was up 0.1 time at 2.4 times at the end of june 24 this is in comparison with 2.3 times at the end of june 2023 So while we self-financed our intense M&A activity in H1, as said, with more than 700 million euro cash out, our leverage ratio finally had a quite limited increase at the end of June. This is mainly thanks to the lower working capital seasonality effect that we had over the period. Obviously, our last year, And our last year end, sorry, leverage ratio, which pointed at 1.2 times, would increase more significantly at the end of this year, 2024, while we hereby reiterate our commitment to clearly maintain a strict, disciplined financial policy. Slide 28, to follow up on the financial structure. The group has a very solid balance sheet with a well-diversified debt structure, no upcoming maturity before June 2026, and obviously very attractive financing conditions. In H1, 77% of our debt is at fixed rate with a stable weighted cost of our gross debt standing at circa 3.4%. SPI proactively maintained a high level of liquidity, it's above €1 billion at the end of June, and notably with the extension and increase of our revolving credit facility, which stood at €600 million historically, now up to €1 billion and with a maturity extended in 2029. Finally, our long-term corporate credit rating, granted by Standard & Poor's and Fitch, remaining unchanged at BB+, both with stable outlook. I now hand over back to Gautier.