Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SPIE SA (FRA:4SP, Financial) achieved a high organic growth rate of 5.8% in H1 2024.
- EBITDA margin increased by 30 basis points to 5.6% of revenue.
- Revenue reached an all-time high of EUR 4.7 billion for the first half of the year.
- Germany became the largest contributing country in terms of revenue and EBITDA.
- The company successfully completed several bolt-on acquisitions, adding EUR 245 million of additional annual revenue.
Negative Points
- Leverage ratio increased by 0.1x compared to H1 2023, reaching 2.4x.
- Switzerland continued to be impacted by very challenging comparison basis.
- Revenue from fiber activities in France decreased as expected.
- Integration costs are expected to be higher in the second semester of the year.
- Political uncertainty in France may create hesitancy among customers.
Q & A Highlights
Q: You had close to record levels of M&A activity in the first half. Do you expect this pace to continue into the second half? Or should we expect a pause on consolidation for the remainder of the year?
A: We had a very good M&A activity in the first half and have an interesting pipeline ahead. We are aware of the need to carefully integrate acquisitions, so we will pace the acquisition with available management bandwidth. Germany remains a main focus, but we have targets in all geographies. Financial discipline, especially in terms of leverage, remains a priority.
Q: Can you elaborate on the outlook for Germany over the rest of the year, particularly in Tech FM and T&D?
A: In Tech FM, energy efficiency and decarbonation are strong drivers. The backlog in Transmission and Distribution (T&D) in Germany is very good and increasing. The trend in transmission, both for overhead lines and substations, remains strong with a high level of investment and projects coming to the market.
Q: Could you tell us more about the impact of pricing power on the top line growth and EBIT margin?
A: Pricing power is linked to strong demand. We have shown the ability to pass inflation to customers and even increase prices beyond inflation. This has a positive impact on margins, contributing to the margin improvements observed across the board.
Q: Have you seen any impact on your clients from the political uncertainty in France? Are there any areas of your business that could be sensitive to policy changes?
A: Our exposure to the public sector is roughly 20%. Political uncertainty may create some hesitancy among customers, but our business is resilient with a large amount of recurring contracts and mission-critical services. The geographical balance of our operations also helps mitigate risks.
Q: Would you clarify if you expect the organic growth rate in the second half to be slower than Q2 or H1?
A: Yes, the pace of organic growth in the second half will be slower than in the first half. This was anticipated at the beginning of the year and remains our expectation.
Q: Could you comment on the margin impact from M&A for the full year?
A: The accretive impact from M&A will ramp up across the year. For the full year, it is fair to consider at least a 15 basis point increase in EBITDA margin due to M&A.
Q: Given Germany is now your largest country, do you think it should be the highest-margin country in the group?
A: Germany is becoming the first contributor to the group in terms of revenue and EBITDA. It might also deliver the best margin in the group this year or next year.
Q: Are there any aspects of the strong organic working capital improvement in June that might reverse in H2?
A: The good performance in working capital is driven by invoicing, cash collection, and maintaining lower residuals. We remain cautious, but our target of 100% cash conversion for the year remains in place.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
