Spie Sa Ord

Good morning, ladies and gentlemen. Thank you for joining us today for H1 Results Conference Call. I'm joined by Jérôme Vanhoef, our Group CFO, and I'm also very pleased to welcome Alexandra Bonazel, our new Head of Investor Relations. Our first half results confirm the strength of our model, the relevance of our strategy, and the quality of our execution. Energy transition and digital transformation are firmly anchored as lasting growth drivers across our markets, and it does allow us to confidently navigate the current geopolitical and macroeconomic uncertainties. To begin, I would like to share a few recent contract examples that reflect this positive momentum. In Germany, SPIE is delivering the full technical installation for a new 16 MW data center in Schwalbach, near Frankfurt. Some of the waste heat generated during operation will be recovered and fed directly into the municipal heating network, creating a highly efficient and sustainable energy cycle. This project also integrates a number of eco-friendly features, such as rainwater collection for outdoor irrigation, a vegetalized facade, and an on-site photovoltaic system. The project is designed to achieve a power usage effectiveness below 1.2 with 100% system availability. In the Netherlands, we installed a 500 kWh modular battery system to support EV charging at Volvo's headquarters. This solution allows Volvo to store electricity from both solar panels and the grid during off-peak hours and release it when demand is high, effectively addressing grid congestion and ensuring a more reliable charging process. The project includes data collection and smart energy management to support the shift towards a fully gas-free and sustainable energy system. It is a step forward in Volvo's global ambition to reach net zero emissions by 2040. In Poland, SPIE carried out the installation of mechanical and electrical systems in a large industrial complex near Lodz. The project features a unique heating and cooling system with six outdoor air source heat pumps generating 3.6 MW of power. This project showcases SPIE's ability to deliver demanding installations covering a large scope from industrial gas systems to fully integrated building management systems with the effective collaboration of our specialized subsidiaries in Poland. In France, SPI Nucleus signed a contract as part of the consortium to carry out ventilation systems study for EPR2 reactors. The contract is part of the plan to build six new EPR2, so new generation reactors in France by 2050 to support the country's low-carbon energy strategy. And this contract is SPIE's active contribution to this new program. It is the second contract for SPIE linked with the new EPL generation. Now moving to the key H1 highlights on slide 6. Revenue increased by 5.8% with a solid 2.4% organic growth. EBITDA margins stood at 6%, reflecting a new step up of 40 basis points. Our structurally negative working capital improved over 12 months, highlighting our steadfast focus on financial discipline. As a result, leverage ratio decreased significantly compared to June last year, with a historically low H1 seasonal re-leverage. Bolton and M&A activity remains sustained with 96 million euros in annual revenue acquired, focusing on attractive markets. Finally, these H1 results strengthen our confidence to meet our 2025 targets. We even firmed up our margin guidance to at least 7.6%. Taking a closer look at the key figures for H1, Revenue amounted to 4,979 million euros, up 5.8%, as I said. Growth was well balanced between a 3.8% contribution for acquisition and a 2.4% organic growth. EBITDA was 301 million euros, that is another double-digit increase of 13.2%, and also a new margin step-up of 40 basis points after the 50 basis points achieved in 2024. Our margin trajectory is extremely solid and this is a core strength to our value creation model. On the balance sheet side, as I mentioned, the average was down by half a ton over 12 months to 1.9 times EBITDA at the end of June 2025. And now focusing on revenue growth, At constant exchange rates, revenue grew by 5.9% in each one, driven by two segments. Germany, which once again delivered very high growth of 15%, well-balanced between organic growth at 6.6% and the contribution from acquisition at 8.4%. Northwestern Europe, which also performed strongly, with revenue of 8.9%, driven by strong organic growth at 8.1%. Meanwhile, France continued to demonstrate good resilience with revenue down only slightly by 0.8%. Central Europe grew by 0.9% driven by a 5% contribution from acquisition offsetting a minus 4.1% organic decline. Global services energy reflected normalization after an exceptional H1 2024 which has benefited from a one-off shutdown maintenance contract. Overall, this performance underscores the strength and balance of our multi-local, multi-technical model, which continues to deliver across a range of geography and market environments. Moving to the margin page, we delivered another step-up of 40 basis points, reaching an outstanding 6% in H1 2025. All segments contributed positively, 40 basis points in Germany and as much as 100 basis points for Northwestern Europe. Once again, this margin expansion reflects our unwavering focus on rigorous contract selectivity, pricing discipline and high-quality execution. It was also supported by a favorable mixed effect from very strong growth in transmission and distribution services and by the slightly accretive contribution from some acquisitions completed in 2024. So talking of acquisitions, in H1 we signed three new acquisitions. Eltec in Poland, adding 19 million euros in annual revenue, transcending our capabilities in building automation and management systems. SD Fiber in Switzerland, adding €70 million revenue in the fast-growing fiber optic services market. Rovitec in the Netherlands, €7 million revenue, complementing our data center offering in the country. And meanwhile, the integration of all 2024 acquisitions is progressing well and fully in line with our plans. Looking ahead, we maintain a robust pipeline of Bolton acquisition opportunities providing good visibility on sustained external growth momentum in a highly fragmented market. Turning to the segment and starting with Germany, with a 15% revenue growth in H1, Germany is now our number one revenue contributor. High voltage recorded very high growth supported by exceptionally favorable project phasing in H1. Technical facility management delivered a solid performance with energy efficiency firmly established as a lasting growth driver. In building solutions, the example I showed earlier does illustrate our strong position in data centers, while our transport infrastructure business is also a strength. In industry services, performance was solid as well, driven by our sector-specific positioning, focused notably on pharmaceutical, wind, and LNG projects. EBITDA margin increased by 40 basis points to 5.6%. This improvement reflects a favorable mixed effect from the strong growth in high voltage, the accretive impact of acquisition completed in 2024, as well as a relentless focus on operational excellence and contract selectivity. In France, Revenue was broadly stable in H1, demonstrating strong resilience in the subdued local macroeconomic context. Only two divisions saw a decline in H1. City networks with the ongoing ramp down of mature fiber optic rollout activities. Building solutions where we kept a high level of selectivity and secured a solid backlog of quality projects. TechFM continued to benefit from a solid recurring revenue and long-standing relationship with high-quality clients. Industry and ICS both confirmed their resilience thanks to diversified sector exposure and the mission-critical nature of the services they provide. Lastly, nuclear services posted a solid performance supported by strong execution of the maintenance programs. EBITDA margin improved by 10 basis points, which clearly demonstrates how lean and flexible our cost structure is. Moving to Northwestern Europe, we delivered an outstanding performance, both in terms of revenue growth and EBITDA margin improvement. Organic revenue growth was very strong at 8.1%. EBITDA margin increased sharply by 100 basis points, the highest gain across all segments, to reach 6.9%. The Netherlands indeed delivered an excellent performance, confirming strong positioning on key markets such as high-voltage energy efficiency for buildings or data center services. In Belgium, high-voltage services are emerging as a key growth driver. supported by a step-up in grid investment from the national TSO and booming demand for battery energy storage systems. Building solutions and technical facility management also contributed meaningfully to the performance. In Central Europe, revenue grew by 1.6%, entirely driven by a 5% contribution from acquisitions, mainly in Poland. Organic growth was minus 4.1%, but is expected to turn positive in the second half, supported by high backlog. In Poland, revenue was impacted by delay in project execution in high voltage. That said, the outlook for this activity remains very positive, driven by high energy transition adjustments. Austria sustained a high level of activity supported by strong momentum in transport infrastructure as well as in transmission and distribution services. Overall, the EBITDA margin increased by 30 basis points in H1, reflecting the continuous focus on operational excellence and a strong contribution from Austria. And lastly, Global Services Energy's revenue declined by 8.2% due to an exceptionally high comparison basis in H1 2004, which has benefited from a one-off shutdown maintenance project offshore Nigeria. Business trends were solid natural gas maintenance activities. In offshore wind energy, commercial momentum is positive as we are leveraging our expertise and technical capabilities following the integration of Coral Group. EBIT margin increased by 20 basis points to 8.6% in H1 2025. And I will now hand over to Jérôme, who will comment the financial results.

Thank you, Gauthier, and good morning, everyone. Starting with a quick overview of our first half financial performance, we delivered revenue of 4,979,000,000 euros, up 5.8%. This performance reflects a healthy level of organic growth, notably in Germany and northwestern Europe, and proven resilience in France. External growth accounted for 3.8%, mainly including the contribution from the 2024 acquisitions. Pebita reached 301 million euros, increasing sharply by 13.2%, underpinned by a 40 basis point margin step up to 6%. The negative net income for this first half of the year due to the impact of our Ornan convertible bond that I will comment later on, I would finally highlight our adjusted net income at 167 million euros up 5.7%. Moving to our revenue bridge, which provides for a breakdown of our 5.8 revenue increase. As already pointed out, solid organic growth at plus 2.4%. The M&A contribution from the 2024 acquisitions, as well as the ones consolidated for the first time in H1 2025, supporting our revenue growth by plus 3.8%. The limited impact from the disposal at the end of last year of a small Belgian IT support business which accounts for minus 0.3%. Currency effects were close to neutral over the period. Let me now comment on our adjusted net income for the first semester. At €166.6 million, adjusted net income was up 5.7% year-on-year, supported by the strong increase in EBITDA. The progression was, however, partly held back by an unfavorable FX gain and loss balance during the period, and this at the level of global service energy that was especially due to the evolution of the US dollar-euro parity. Our normative tax rate is kept identical to the one we retained for the full year of 2024 at 29.2%. So solid results overall despite exceptional FX-related impacts. Turning now to our reported net income, which was exceptionally and quite significantly impacted this semester by the non-cash accounting loss due to the IFRS treatment of our Ornan convertible boom. Given the sharp increase in our share price over the period, we recorded in our P&L a negative fair value adjustment for the Ornan of around 160 million euros. This was mitigated by 41.9 million euros deferred tax assets. As a result, our reported net income stood at minus 13.4 million euros for this first semester. By the way, let me remind you that this Ornan accounting treatment is a particularity of the IFRS, obviously not considered under US GAAP. Without this on-hand accounting effect, our reported net income would have amounted to a positive €107 million compared with €57 million last year. Given the significance of this accounting impact, let's delve a bit on this topic. And before we get more technical, two major principles you need to have in mind on convertible bonds. One, when it is out of the money, meaning share price is lower than conversion price, the issuer, in our case SPI, remains liable for the nominal amount of the instrument. As soon as it is in the money, the value of the convertible bond in our balance sheet does increase, and this proportionally to the share price. To be more specific, the derivative component of the Ornan is revalued at fair value at each closing, based on SPI's share price. SPI's share price rose sharply from €30 at the end of December 24 to €47.7 at the end of June 2025, thus significantly surpassing the €32.43 of the conversion price set for this Ornan convertible bond, and thus leading to a significant increase in the fair value of the derivative instrument recognized as a liability in our consolidated balance sheet. I remind you once again that this is strictly non-cash IFRS accounting entry. remaining non-cash at redemption and this at the end of the issuer in me in other words at our hand as already disclosed at the time of the issuance of this ornan the potential dilution at redemption assuming mixed redemption in cash and in shares would be very limited if we retain 145 percent premium to the conversion price meaning a share price of circa 47 euro, the one-off dilution would be limited to 2.3%. Turning to working capital, which remains a structural strength of SPIE's business model. As you know, we consistently operate with structurally negative working capital throughout the year. Compared to last year, we further improved entire working capital performance with a 10-day reduction from minus 17 days at the end of June 2024 to minus 27 days at the end of June 2025. This improvement was observed in all working capital items, of which a very effective working progress management, which evidences a strong invoicing discipline and cash collection overall. Moving on to free cash flow, the starting point is obviously our growing EBITDA by more than 13%. As mentioned, our strong working capital performance translated to a limited cash outflow of 277 million euros, a significant improvement compared to the first semester of last year. As a result, operating cash flow turned even positive for the first time in H1, and this considering the usual cash flow seasonal pattern of the group. Free cash flow improved accordingly to minus €109 million to be compared with minus €211 million in the prior year. In line with our commitment to optimizing value to shareholders, We also executed a 39 million anti-dilutive share buyback program in the first quarter at an average price per share of circa 31 euros. Overall, our net debt increased over the first half by 347 million euros. With our leverage ratio, I'm moving to the deleveraging page. With our leverage ratio down to 1.9 times at June end compared to 2.4 times a year ago, we further evidenced the deleveraging power of our cash-generative model. It also marks an exceptionally low H1 seasonal deleveraging, only 0.3 times compared to December end. Lastly, to conclude my part, a word on our financing structure. In May, we successfully refinanced our 2026 bond with the assurance of a new five years, 600 million euro sustainability linked bond. It was largely oversubscribed. It carries a fixed coupon of 3.75%, implying a spread below 150 bps. which by the way rather belongs to investment grade issuer category. SPIE's entire debt profile with this new bond is now fully sustainability linked in line with our mid-term ESG targets. 81% of our gross debt is now at fixed rate with a weighted average cost of such a debt at 3.4% over the first semester. High liquidity level ensured all along the year with, at the June end, 1.3 billion, including 295 million euros in net cash and 1 billion euros of undrawn credit lines. Our shareholder returns continue to improve, starting with the inaugural 39 million euro share buyback program, as well as the successive dividend payments of 75 cents and 30 cents corresponding to the, for the first part, the final 2024 dividend payment and to the 2025 interim dividend respectively. Thank you for your attention. I now hand over to Gauthier.

Thank you, Jérôme. Based on this H1 results, we confirm our full year outlook and we even frame up our margin guidance. So we expect strong total growth, pushing revenue well above the 10 billion euro mark, supported by further organic growth and active Bolton M&A. We now expect an EBITDA margin of at least 7.6%. And as every year, we intend to maintain a dividend payout of around 40% of adjusted net income. Thank you very much for your attention this morning. And in case you would have forgotten, let me repeat it once more. It is a very good time to be a European electrical engineer. And with that, we are now ready to take your questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. Next question comes from Alexander Peter C. from Bernstein. Please go ahead.

Yes, hi, good morning, and thank you for taking our questions. So I just have three. The first one is on your guidance for 2028 that you issued at the CMD, so the 7.7% margin, I think I recall correctly. Is that now going to be achieved early? Because you need only a very small progress versus what you're going to achieve this year to get to that target. So is that already achievable in 26? Second question and third question, just a very brief view on geographies. Can France improve to year-on-year growth for the year with a stronger second half? as the difficult comps wash out. And then Central Europe, again, we had a similar decline there as in Q1. Will that also reverse into stronger growth and can we end the year in positive territory for Central Europe? Thanks.

Thank you. Regarding the guidance for the margin, we mentioned at least 7.7% in 2028. But we have made good progress so far, and we're going to make good progress for the year. So let's deliver on our guidance for 2025 first, and then we'll take it from here. Regarding organic growth in France, The visibility is not outstanding at the moment. It might improve during H2, but it's not something I would guarantee today. We are reasonably confident for the second half of the year, but we've seen quite a significant fluctuations in France. The mood is not over enthusiastic at the moment in the business world. Let me stress again that the decline on H1 was solely on the back of our optic fiber business within the city network division where we continue to decrease at a slower pace. And then on commercial installation where we have a deliberate selectivity on the market where barriers to entry are always a bit lower. We also might benefit from an easier comparison basis for H2 in France. And for Central Europe, again, we have a number of high voltage projects where in Poland usually we are also responsible for getting the authorization before starting work and this might prove sometimes a bit difficult to forecast in terms of completion of this task and that's why it does create fluctuation. The backlog in high voltage is good in Poland and we see a constant a flow of new call for tenders coming up, so we are confident in that. And altogether, the building station business in Central Europe is also a bit under pressure right now. Cutting a long story short, also on the back of very good activity in Austria, we think that we will have a positive H2 in Central Europe.

Thank you very much.

Next question comes from Remy Grenou from Morgan Stanley. Please go ahead.

Good morning, Gautier. Good morning, Jerome. Three questions, if I may. So the first one would be on Germany. So interested in having an update on the potential acceleration of investment from public authorities. If you have been getting any more clarity on the timing and the potential magnitude in markets where you think you could benefit from these. So any updates versus when we discussed that last, that Q1. The second part of the question would be, on the overall sentiment of your customer in the private sector in that country as well. If you feel like there is potential to accelerate further from the already quite good organic growth that you're generating in that country, so that first part on Germany. The second is still on that same country. I think that there is a sentence where you're calling a very positive phasing of high voltage contracts responsible for the good organic growth in H1. Any risk that this could reverse in the second half and we see slower organic growth? So just some clarification on that. And then the last question probably for Jerome on working cap improvements. Can you elaborate a little bit on the drivers of that? If there was any one-off or particularly strong cash collection at the end of H1, which could imply a little bit of reversion, or do you believe that the improvement you have delivered is something that is structural and we are going to continue to see over the next few semesters?

Thanks. Thank you, Remy. With regard to investment programs in Germany, as you know, the budget is currently under discussion in Germany and it will be approved towards the end of the year. And this budget reflects the programme announced by Chancellor Metz, so clearly there is a stronger push towards infrastructure investment. towards the defense as well, so very much in line with what had been announced back in March. So it does confirm these trends, which are favorable. Does it translate immediately in orders for SPIE? Obviously, no. It will take some time. It does create a more positive sentiment for our customers in Germany. That's why, for instance, technical facilities we see good trends right now and as well as in the industry. With regard to high voltage phasing, I think it is important that you mention it and that we keep it in mind. Yes, we had a very, very positive, I want to say very positive, I'm taking double digits, growth in high voltage in the first half of the year. We don't anticipate to have this kind of very strong growth in the second half. Clearly, these projects are fairly bulky. You're talking sometimes 40, 50 million euros project. As I mentioned several times, it is with four customers. So it is the same contract, the same technology, the same teams. So it is very safe and at good pricing. So it is very safe in terms of margin execution and margin delivery. But it does create volatility. And from one quarter to the other, depending on when we started the year before, depending on if one project gets delayed for last minute planning, permission hiccups, etc., it does create volatility. So we had a very, very strong H1. We don't anticipate this to last for the whole year.

Good morning, Rémi. With respect to your question on working capital, very clearly no one considered in this first half and especially at the end of June. It's basically an improvement across, as I said, all the working capital items constituting it. Basically, what we observe is a very clear improvement in our ability to invoice, so very strong discipline in that respect, thus leading to an optimization of the WIP inside the working cap. I think that trend will sustain an obvious reduction in the working capital swing in Trier, not necessarily at this stage. in favor of an overachievement toward the end of the year. So it's much more the curve entire, which is flattering a bit. Obviously, putting us in a very confident to achieve once more our 100% cash conversion target for the whole of the year.

Great. Thank you very much.

Next question comes from Christophe Chaput from Otto. Please go ahead.

Good morning. I've got three questions as well, please. The first one is a quick follow-up on Central Europe and Poland. You stated a negative impact from the delay execution in high-voltage. Could you give us a rough idea of the impact in million euro and Are you going to catch up in Q3 or Q4? You say that H2 will be positive, but just to have kind of magnitude. The second one is, could you come back on the margin improvement in H1? I'd like to know if you can share with us the impact of the accretive acquisition on the plus 40 pips. I mean, I calculated the plus 15, but just to have your view. and also the impact of the mix effect on the transmission and distribution. And the last one is on the full year. I totally understand, let's say, that you are cautious in France on top line. But would you say as well, or nevertheless, that the margin in France for the full year will be at least flat, considering that you see an improvement by 10 bps in H1? Thank you so much. Thank you.

Thank you, Christophe. Regarding high-voltage impact in Central Europe, I'm afraid I cannot disclose the amounts. Again, the trends are favorable. There are fluctuations. It is part of life in Central Europe, also linked to the nature of the contract, as I mentioned. Regarding margin improvements, we're talking about 10 basis pips or slightly less than that for the first half of the year for acquisitions. And we expect it to be in the range for the whole year, maybe kicking up slightly with some of the acquisition work. where revenue will be stronger in the second half. Impact of mixed effect, difficult to quantify per se, but obviously, as I mentioned, high voltage, be it in Germany or in Netherlands or even in Belgium, these are accretive to the margin. But again, we have lots of moving parts. All our countries are progressing. In Belgium, it's not only the energy. We're also progressing well in industry. In the Netherlands, we have a very smooth progress for building solutions. So I think everybody is playing a role and the mixed effect is one of the moving parts. But altogether, I'm really satisfied with the quality of execution and also the discipline on pricing. We still enjoy good pricing power. And I was mentioning in the past that inflation was more a drag towards our margin improvement. Well, with less inflation, I think it shows that margin improvement is linked with the quality of execution from bidding to delivering the projects. The full year margin in France, I'm not worried. I think we're able to maintain the progress achieved in H1. Again, a very disciplined team, very seasoned. We have a flexible cost base and so we're able to adapt rapidly to fluctuations and we will always keep the business lean. So we are, as I've mentioned several times, we don't mind to play defense. It's something SPIE is very good at. So no worry at all about the margin in France for the full year.

Thanks so much for the answer.

Next question comes from Rory McKenzie from UBS. Please go ahead.

Good morning, all. It's Rory here from UBS. I've got two questions, please. Firstly, can you talk about in France, you referenced the strong sectors within building solutions that are holding up quite well, you know, data centers and defense. What are the markets that are weakest in France at the moment? And could you give us a sense of the relative exposure to those sectors? And also, are you putting staff out permanently and redeploying them within that market? And then secondly, I wanted to ask about pricing power generally. You already referenced it's still strong, but wage inflation indicators are cooling across many markets. So could you speak specifically about the shortages of electrical engineers that you're facing or the market is facing? And obviously, given that you keep saying it's such a good time to be an electrical engineer, do you think people are being attracted into the market at all at the moment? Thank you.

That's a very good point, Rory. Thank you for that. Yeah, yeah. It's a very good time to be an electrical engineer, and we deploy a lot of efforts to help people discover the world of electrical engineering. And so we do try to bring people from adjacent markets, adjacent skills to our... business and not unsuccessfully. We manage to train people from other areas and it's something which does help a lot. We also work a lot on the retention and I always mention the very helpful factor of shareholding plans. We do create a strong bond to the company and in fact we perform on a regular basis satisfaction surveys of our employees. It's a great place to work, certifications which are increasingly deployed over the business, so it's working a lot on that, and also on co-optation, so our own employees recommending hiring of people they know, which is a good way to have a mutual understanding of the business. Apart from electrical which are still a short supply. It's fair to say that in other areas such as administrative jobs, the tension has eased a bit, so it is easier to recruit these qualifications and then we have more time to focus on the technicians. Regarding market, I think what's weakest in France at the moment is commercial installation. It accounts for half a billion of our revenue, roughly, which by the way, margins which are slightly derivative compared to the average in France. And we do focus on technical installations, technical buildings. The run-of-the-mill office block or the run-of-the-mill school or college is fairly out of bounds for us at the moment. There are lower barriers to entry. And also people moving from the housing sector, which is very subdued at the moment, they try to address this kind of project. So that's not what we are focusing on at all. But we have nice wins in data centers. We have nice wins in some industrial... buildings and we have also a number of carefully selected projects for the healthcare sector and that's why we managed to maintain a decent level of production. But this is clearly the area which is mostly fought for at the moment.

Great. Thank you. And do let us know if you ever come up with a program to train research analysts to engineers. Thank you.

It will be a walk in the park for you, Rory.

I wish. Thank you very much.

Thank you. Our next question comes from the line of David Sturdon at Catherstoke. Your line is open. Please, sir, go ahead.

Yeah, good morning. This is David from Kepler. I have two questions. The first one is regarding your backlog or order book. Can you give us the trends regarding order book and backlog per region? And my second question is related to Germany and the mega stimulus. Do you think that there is a constraint from the human factor? In other words, do you think that the stimulus is also constrained by the lack of skilled people for the construction and for the electricity part of the building?

the backlog by region, let me mention that at speed level the backlog is very healthy and we have a few fluctuations by country, by sector, but all together we see a trend which remains very reasonable with positive organic evolution of our order intake. Regarding the margin stimulus, I think it is a fair point, but it's not only pertaining to our own resources, it also pertains to the resources at customer's end, because they need to plan for new projects and they need to organize the funding and issue the call for tender. We see also limitations at that end and it's often the case that our customers ask us to second people to them to help on the engineering phase. It is also the case that they tend to to do less engineering at the end and tell us with contracts where we are going to do more basis or even sometimes process engineering. So it also creates opportunities for us, but you are right, you have to see the whole picture, which is not only printing the money, it is also creating all the technical documents before you are able to launch a project. However, this is fairly well-recognized in Germany right now, and I think people are really looking for reinforcement, for other solutions also coming from outside of Germany to help them support this investment plan.

Thank you. I have the last question regarding your exposure to the defense sector. Are you exposed to this kind of clients?

Well, at the group's level, not surprisingly, our exposure to defense is a bit under 2% of our turnover, which is fairly in line with the proportion of GDP spent for defense across Europe. And again, not surprisingly, the lion's share is in France, where we work a lot for all branches of the army. We do maintenance of nuclear submarines, we do maintenance on air base, we work on logistics centers of the army, etc. But we also do maintenance of barracks, of data centers for the Dutch Army, and last year we gained a contract for the overhaul of a naval base in northern Germany. And that's for the defense ministries, but we also work for the industrial companies in defense, and we do maintenance for Dassault plants in France. We work for Thales, for Airbus. We maintain the helicopter factory close to Marseille. So, yeah, we have a good exposure and a good knowledge of the processes. In Poland, we are also qualified, a special qualification to work for the Polish Army, which we own. And we have all the processes in place for those contracts where you need to have an special qualification like in France and equivalent certification in other countries.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. Next question comes from Laurent Gelibart from BNP Exane. Please go ahead.

Yes, good morning, Gautier and Jérôme. So I have two questions. The first one relates to your pipeline of Bolton ahead. So could we expect acceleration in terms of M&A into H2? And the second one is a technical one on the Ordiarnan. So for Jérôme, could you confirm that when you will repay your bond, you will repay it in cash, so 400 million euros?

Regarding M&A, we are constantly working on a strong pipeline and actually we have a number of deals cooking right now, so let's hope that they come to fruition in various geographies. We expect further sustained M&A activity for the second half of the year as usual.

Regarding the Ornan, Laurent, the specificity of the Ornan type of convertible bond is especially to provide for the issuer the optionality to redeem in cash and or in shares. I do confirm that the base case at SPI so far is definitely to redeem in cash the principal amount, so 400 million, and to consider issuance of new shares for the complementary part, thus the very limited dilution that we have already articulated, 2.3%, for instance, if we retain a share price at 47 euro at the time of redemption, and then you can make a linear extrapolation starting from there.

Thank you. Yeah, it's me again.

Just one follow-up question which relates a little bit to what David was discussing on the backlog. I guess one of One of the key reasons for margin acceleration has been an evolution in the mix over the last few quarters. Can you give us a little bit of insight from what you're seeing in that backlog momentum of activity? Do you think that the pace of margin improvement you're getting from that evolution in the mix is something that can be sustained over the mid-term? Or have we seen over the last few quarters a little bit of an exceptional situation where it was firing on all cylinders within activities where the margin is supportive and a little bit subdued activity in lower margin part of the business. So, just want to have your view on whether that improvement in margin coming from mix is, you think, sustainable.

Well, you see the pace of increase over recently were 50 basis points last year and the 40 basis points this year at least. So we cannot guarantee we're going to increase 50 basis pounds every year. However, we think we're not at the end of our tether. We're quite able to further progress. There's a mixed effect you have mentioned. There's a contribution from acquisition and I think this will be a bit stronger in the second half of the year compared to the first one. And there was a constant focus everywhere. In the market, the demand in a number of sectors remains strong, and customers are aware of the scarcity of good resources, of well-trained people. So I'm confident going forward that we're able to maintain further margin increase But I would not commit to this kind of step up every year, obviously.

Thank you, Gautier.

And we now have a follow-up question from . Your line is open. Please go ahead.

A follow-up question regarding your M&A. Do you have the plan to open some new geographies, new countries in Europe?

It is not a plan right now, but we do not rule it out for the future. We still have a lot to do in our existing geographies, and I keep mentioning how Germany is important to us. We are number two in Germany with a market share of 44%. It is a very good country to be in, and it's going to get even better by the look of it. So it's clearly our priority going forward. We have also countries like Poland, where there's quite a bit to do, and Poland is 80% of the GDP of the Netherlands, as an example. And these are countries where the indebtedness is reasonable, and it's roughly in the range of 50% of the GDP, give or take. It's the same for the Netherlands as well, by the way. So we can expect a good pattern of the economy going forward, and I think it is worth reinforcing our positions in these countries. Having said that, we do not rule out at some stage to expand our geographical footprint. There are no concrete plans as we speak here.

Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing remarks.

Thank you very much for your attendance today. Thank you for the interest you take in, Steve. And you can rest assured that we're going to work very hard on delivering on our promises. And do not forget, it's a good time to be an electrical engineer. Thanks a lot. Have a good day.