Séché Environnement SA (SCHP) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you for joining us for the presentation of our annual results for 2023. I would also like to greet those who have connected to the application via our website. 2023 confirms once again the relevance of the growth strategy of Séché Environnement. During the course of last year, Séché has strengthened its results in France, internationally, on the energy transition market and in particular, on the circular economy and the fight against global warming. Maxime Séché, the CEO, whom you recognized to my right, I think he looks a little bit like me, will be presenting the results for 2023. Baptiste Janiaud, who is our Finance and Administrative Director, will be giving you the details on the financial performance for 2023. Without further ado, you may send your questions by e-mail to our Head of Investor Relations, Manuel Andersen, to the address, which you can see displayed behind me. We will be happy to take questions at the end of this presentation during the usual question-and-answer session. The financial and actual financial performance of Séché Environnement 2023 bears out the validity of our business model, combining visibility, profitable growth and sustainable growth. The results, we're going to report to you for 2023, have reached and, in fact, exceeded the targets that we set a few years ago for 2025. Indeed, our business model is, first and foremost, a growth model. We are 2 years ahead of our targets, and the contributed revenue has risen above the symbolic threshold of EUR 1 billion. Growth in the business, which was posted yet again in 2023 on a constant scope, confirms the commercial momentum and the good trends of most of our businesses consistent with previous years, in particular in France. This strong, sustained growth also illustrates the quality of our external growth strategy. The strategy broadens the range of our offers and extends our geographical coverage. In our international business, we have new strategic acquisitions in Italy, Peru and Namibia, which consolidate our know-how as a specialized actor in hazardous waste and our position as a key operator with industrial clients in these regions. In France, we have integrated this year new businesses with a high technological content, namely industrial -- the industrial water cycle in a promising market, driven by environmental regulation. This broadened offering combines the know-how across the value chain for waste management with ran expertise in the production of decarbonized materials and henceforth, recycled water. Offering thus responds to growing regulatory requirements in these areas for our clients as well as responding to their environmental transition strategy. These businesses are strongly aligned on the European green taxonomy and Séché is thus offering its clients, both public sector and industrial companies and offering a proximity offering, which corresponds to most of their environmental challenges for sustainable growth and their regulatory requirements. The consistency of our offering with future and current challenges of our clients is without doubt a strength, which lend strong visibility to our results. Our business model is, therefore, a profitable growth model. Once again, in 2023, our operating performance was strong and up strongly on 2022 at constant scope. This high level of operating performance illustrates our ability to swiftly integrate acquisitions from previous years, recent years and to implement immediately industrial and commercial synergies and to raise them to these -- to its levels of profitability. It confirms our capacity to maintain a strong financial situation with control over the debt load, which supports growth. Our extra financial results are also very strong. After the validation by the SBTi of its climate trajectory in keeping with the Paris Agreement, Séché, in 2023, will be meeting its targets set for 2025 in terms of reducing greenhouse gas emissions. By the same token, the group has also strongly increased the amount of GHGs that it has been able to avoid for its clients, through its recycling business, putting it in a strong position to achieve its 2025 targets. Furthermore, Séché has been making efforts in various crucial environmental issues, both for itself as well as its clients, such as problems arising from savings in the use of water or energy or issues associated with protecting biodiversity. That's what we can say for responsible to a sustainable growth. As you know, we have defined a new road map for 2026 in order to drive our growth over the medium term. We presented this to you in December of last year. New financial targets have been set -- setting out strong growth outlook for the business, growth in operating profitability and strong cash flow. We, of course, are confirming all of these targets. In extra financial terms, more intensive implementation, which is underway and the implementation of new flagship projects will enable us to continue to build a group that will be increasingly respectful of an environment with increasing savings on its use and impacts. This -- it's also through our ability to step up our environmental transition that we will be able to share the favorable impact of this with our clients through a partnership relationship, which is to everybody's mutual benefit. So in a few words, this is the conclusion of the Board of Directors. We have a financially robust innovative group, able to rise to the societal challenges of our time. The Board is fully confident in the group's capacity to rise to the challenges of the future, as it has been able to exploit the opportunities arising from crisis in recent years and therefore, the Board will be recommending to the Annual General Meeting, a new increase in the dividend. The dividend will be set at EUR 1.20 for 2023 versus EUR 1.10 for 2022. That's EUR 1.20 for 2023. I will now hand over to Maxime Séché, who will give you a detailed presentation of the strategic results for 2023. Thank you very much.

Good morning, everybody. As my father just explained, 2023 has borne out the relevance of our strategy -- our growth strategy, and we are well on target to achieve our road map for 2026. Organic growth was strong and profitable. It was strong with an increase of 6% in our consolidated revenue. This confirms that our markets are on a positive trend. Internationally, the business in 2023 can be compared to that of 2022 with exceptionally strong depollution contracts. Our operating profitability is high and up on [ 2023 ]. We have deployed an action plan to deploy plans to rise to our group standards. Strong cash flow generation has enabled us to invest in industrial tools and to invest in external growth. The net income on our historical scope is up 23%. Extra financial criteria have remained the group's priority. Business is strongly aligned on the green European taxonomy since it accounts for 70% of our consolidated revenue. Our business is, therefore, at the core of the concerns of the economic players. We have a responsible growth based on strong environmental criteria. This strategy was validated by the SBTi in 2023, meaning that we are ahead of our targets for 2025 in terms of reducing GHGs. And I will go back in further detail on our extra financial performance a bit later. External growth backs up our organic growth. 2023 was very strong with EUR 80 million of acquired business in France and internationally. This is the integration of our business with high technological content businesses and strong entries -- barriers to entry with the industrial water cycle. We have strengthened our offering in targeted areas in Southern Africa and Latin America. This combination of new markets, new clients, cross-sells, underpins our organic growth for the future. As I said during the Investor Day on -- in December, our performance will continue to improve because it reflects the quality of our business model. Our business model is strong, relevant and provide strong visibility. It is strong because it is based on very strong family values, which put the human factor at the heart of the company. We have a long-term vision, which enables us to have a constant approach, seeking environmental performance. It is also highly relevant because we have been able to respond to the issues of sustainable development, both in the regions and for companies. With our industrial tools, we're able to convert industrial waste into recovery material. And through our services, we are dealing with the safety issues of industrial plants. And we are accompanying industrial relocation to the regions, while making good use of our resources and protecting biodiversity. We have a strong visibility because we're at the core of the issues surrounding sustainable development, namely climate change, the environmental transition and protecting the environment. We also are facing the growing scarcity of energy and water. Regarding the dynamism of our markets, our business and services markets and dynamics, circular economy have grown strongly by 11%. They are at the core of the demand from our clients for regenerated resources, which are decarbonized. Our material recovery business is strong through the regeneration of solvents and the use of critical inputs using very specific chemical processes. The valuation of -- this is achieved through the indexation of our sales contracts. In 2023, the secular economy accounted for 1/3 of our revenue. We continue to invest in these businesses in existing tools and in new tools. For example, at All'Chem, the capacities have been reorganized in synergy and in complementarity with our specialized chemical business. The organic growth of the services activities stands at approximately 6%, representing 46% of our contributed revenue. This is mainly services to industrial companies with a global offering, depollution activities and also dealing with environmental emergencies. These businesses have been the strongest, especially in France. I recall that through our global offering, clients can outsource their issues regarding our environmental management. We have a strong base effect, especially at Spill Tech from 2022, which won very significant contracts in 2022. This applies also to Solarca. Solarca had an order book at record levels for -- in 2022 following the post-COVID recovery. We await a strong pickup in 2024. Our service offering is fully relevant to the needs of companies and local authorities. It is -- we will continue to invest in the service businesses through generating high added value. And finally, the management of hazardous waste grew slightly less quickly because we again have a very strong 2022 base effect. This is especially true for overseas. In France, we have strong volume pickup, both in the thermal businesses and also safety in the circular growth. We have completed our offering at regional level with external growth transactions. As you know, in the circular economy, we have made acquisitions in industrial water and in sanitation. The acquisition of Rhône-Isère in 2023, completed that [indiscernible] in 2021 and Assainissement 34 in 2022. Regarding industrial water management, we acquired an industrial portfolio in 2022. 2023 was an integration period with the gradual transfer of all of the contracts. We also use these ports and commercial functions of the vendor during the transition period. This led to nonrecurring cost. So the contribution to 2023 is not representative of the quality of the acquired portfolio. We have growth ambitions to increase our profitability in the years ahead as we presented at the Investor Day in December. Internationally, external growth rounds out our offering in various regions with the acquisition of the Furia platform, which runs out our Mecomer subsidiary. We have, therefore, become a significant player in hazardous management in Northern Italy with a widened offering and also a larger portfolio of large strategic accounts. With Rent-A-Drum in Namibia, we are continuing to develop in Southern Africa. We've been leveraging our expertise and our tools in South Africa, and also, our Spill Tech subsidiary, which now has a presence in Namibia. That allows us right now to meet the needs of an industrial clientele locally. Thanks to Essac in Peru, we are deploying our services for environmental crisis management, which rounds out our existing offering in the territory. The international share of business accounts for 26% of revenue group-wide at the end of 2023. The share is likely to increase in 2024 with the effect of the last acquisitions being felt for the full year. Therefore, we're continuing to internationalize the company in a selective way, present in buoyant markets for our business lines, taking position in countries that have a strong industrial baseline and good regulatory framework, which helps us leverage our tools and know-how there. For the last 3 years, we have been publishing an analysis of our businesses based on the new reporting standards. This is, of course, the European Green Taxonomy. 2023 confirms our solid positioning group-wide on issues related to the green transition with a 70% alignment rate with those criteria. That rate is up 3 points versus last year. This is due to the integration of the new scopes, especially on industrial water treatment in France. Alignment with these criterias confirms our commitment within our businesses and markets towards the green transition and green matters. On our climate targets, as you know, the group has seen its carbon reduction strategy approved by SBTi in 2023. This strategy allows for a drawdown of 25% of our in-house gas emissions versus 2020 by 2030. The action plan focuses on a number of things, including reducing fossil energy consumption and fighting against methane emissions. This is deployed across our industrial sites and has been since 2021. These actions have already started to bear fruit. As between 2021 and 2023, the group was able to reduce its greenhouse emissions by 11%, achieving ahead of time, the intermediary minus 10% target set for 2025. The group also set a target of plus 40% by 2025 its capacity to reduce the carbon emissions in its clients through providing secondhand raw materials in large part, and we are in line with those targets, up 29% between 2021 and 2023. This also goes to show our expertise in the fight against climate change. Our growth dynamic is going to continue, thanks to various growth drivers. We have know-how and industrial tools, which enable us to get ahead of regulatory changes such as lower carbon and zero artificialization. We're also continuing to develop our industrial capacity. For example, in France, we have new Speichim distillation towers. And also in Southern Africa, we've strengthened our hazardous waste -- our solid hazardous waste and liquid hazardous waste treatment capacity. This extra capacity is rounded out by an extension of our offering in services with high added value and also in new markets. For example, environmental crisis management and industrial water management are signaling strong demand in our customers and should lead to strong growth in industrial and sales matters. Finally, our research and development department is helping us get ahead of future needs. For example, every phase and lithium management and bromide and solvent inputs as well. The targets that we presented during the December Investor Day have been confirmed for 2024. We fully believe in our ability to drive our revenue and operating margins, whilst also reducing the debt the group carries. We're aiming for revenue organic growth of more than 5% and the contribution of acquisitions carried out in 2023 of plus EUR 60 million. Therefore, revenue target is set at EUR 1.1 billion. Our operating profit and recurring operating profit targets are EUR 230 million and EUR 105 million, respectively. For 2026, our development plan expects a EUR 1.2 billion operating profit and also continuing to improve operating margins and good cash flow generation, as we are expecting cash flow generation on the horoscope of more than EUR 250 million for the 2024-2026 period. This will feed into our industrial development and/or external development and also help us reduce our debt. Here you have a breakdown of the various environmental indicators that the group has committed to improving by 2026, that was back in December. This relies on transitions that are accounted for, that have hard numbers as is required by the European regulation known as the CSRD. I've already presented the climate indicators. We also have water and energy measures that are being deployed in line with our forecast with minus 7% and minus 6%, respectively, of consumption in 2023. Protecting biodiversity is also an important thing for the group. Once again, the group is stepping up to the plate and is fulfilling its act for nature commitments with a 34% advancement rate for 2023-2027 action plan. Favorable changes in these indicators go to illustrate the company's ability to reduce its environmental impact and reduce the impact of its clients. I'd now like to give the floor to Baptiste, who's going to run down the accounts for the year?

Thank you. Good morning, everyone. I'd, first of all, like to present the main financial indicators for 2023. As you've already heard, these financial indicators are fully in line with what we presented during the Investor Day last year with contributed revenue, which is at EUR 1.013 billion, up 6%, slightly higher than what we shared with you during the Investor Day. We're also seeing strong growth in operating profit at EUR 207.7 million, EUR 101.2 million for current operating income. On the historical scope, we had EBIT (sic) [ EBITDA ] up 10% and recurring operating profit, which is also strongly up at 18%. Debt is up, which shows that we had an active year for acquisitions with operating cash flow, which is still in the black, which helps us contain the increase in debt and means that we can keep a low financial leverage, which is still below our target of 2.9x operating profit. I'd like to remind you there are some acquisitions, which were only consolidated for part of the past year. So if we take into account the full year effect on operating profit, we would have been at 2.7x EBIT (sic) [ EBITDA ] which, once again, shows a strong year in acquisitions and a credit situation, which remains robust. Let's start things by looking at revenue. Overall revenue is at EUR 1.89 billion, with a non-contributive part, which is at EUR 75.4 million, made up of investments in delegation of public services, which you can find under the IFRIC 12 item and TGAP, which is the French tax, which is passed down in cost to our client for EUR 59.8 million. The scope, as I expressed, is important with [ STUI ]. So that is industrial water activities that were purchased from Veolia, which were transferred throughout the year 2023 for EUR 49 million. We've got Furia, which is that Italian business that Maxime mentioned, which was consolidated from the final quarter 2023 for EUR 16 million. All'Chem in France was an acquisition that was carried out in 2022, EUR 8.5 million there. Essac in Peru was consolidated for the final quarter of EUR 20.3 million and some small acquisitions here and there. We've got sanitation Rhône-Isère and some others as well. An important takeaway for our business analysis is the negative ForEx, strongly negative, minus EUR 16 million, which is almost entirely due to the depreciation of the South African rand versus the euro in 2023. So organic growth, which is now at plus 6.4% in euros, that is EUR 57 million. Now I'd like to move into a geographical breakdown, starting with France. In France, we're seeing strong growth, 9.4%, with generally a strong observable dynamic in valuation, thanks to a positive price effect on energy valuation services that are in line with expectations and sluggish but good growth on hazard management. Internationally, organic growth is near 0% with a situation that is extremely uneven depending on the country or the region that you look at, and that is why we are going to take a few moments to look at a breakdown by zone, starting with Europe, plus 2.7%. Generally, the second financial half is in line with the first with growth that is driven by an increase in volumes for the year with plus 15 million tonnes for one of our companies. South Africa, 12.3%, robust business like-for-like for Interwaste, plus 1.5%. And Spill Tech business, which we have been mentioning throughout the year, which is down minus 26%. Spill Tech in 2022 benefited from large spot contracts, thanks to the urban flooding for Durbin, which was flooding, which didn't happen, again, likely for them in 2023. AmLat is up 47%, with the second half, which is comparable to the first with good performance in Chile and Peru. And Solarca, which is worldwide, which is down in sales, 14.3%, slightly down, therefore, but it is getting back to business as usual with 2022, which did benefit from some rubber-banding effect after COVID. Breaking down by quarter now. An important takeaway here is that the fourth quarter was a demanding act to follow with overall revenue of EUR 251.9 million. If we look at the French share in the international share, we can see that in France, the strong dynamism in the business including in the fourth quarter, which had a very strong performance. And you can see that on the fourth quarter, we are nearly EUR 190 million mark, which I think is probably a record for our French business. Internationally, overall, quarter-on-quarter, we've seen stable business with overall business, which has been extremely demanding on the fourth quarter 2022 with revenue, which is exceptionally high for Spill Tech with a quarter that was up EUR 10 million and Solarca, which was up EUR 9 million. In Peru, also put in a strong performance for that quarter. Very briefly now if you look at the business mix, we can see that hazardous waste is 70% of business versus 63.7% in the previous year, experienced organic growth, 8.9%, which is very strong, which again shows the relevance of our business strategy in France, plus 11.5%, and internationally, plus 3.8% with significant contributions from the international segments for the circular economy and services. Of course, for nonhazardous waste, we saw growth, which was more sluggish organically at plus 2.2% there. If we look at operating profit, starting with EBITDA, this is a comparison between France and international and then we will come back to volume and price effect. Overall, if we look at an EBITDA analysis, organic growth is at more than -- is up 10%. Like-for-like, this is an improvement in our operating margin, 22.6%, up to 23.3%. We've also seen significant increase in EBITDA on the French scope at plus 17%, plus 19% if you were to look at that like-for-like. And also strong improvements in EBITDA margins, 23.6%, up to 25.7% there, which shows the resilience and the strength of that market. As a reminder, there were some strongly positive effects such as the energy price and also some negative effects were experienced, such as the integration costs that we mentioned during the first half with STEI. For example, we had purchased some contracts there, some integration costs that did weigh down EBITDA, about negative EUR 3 million there in 2023. On the international segment, very generally, we've seen margins that are in line with the -- those on the 30th of June, a negative ForEx effect EUR 3.3 million there. And generally, as I expressed, business was more sluggish on the environmental crisis management segment and the pollution management side versus what we had in South Africa in 2022. Looking at price volume effects and costs, we have a dichotomy between France and our international business. We -- if we went further into the breakdown on the international business, we would have a dichotomy associated with the breakdown per country. First of all, looking at the French business, we see a positive volume effect with a slight increase in availability of our tools with our industrial efficiency policy feeding through with strong momentum on services to industrial companies and very positive price effects in line with the trend seen at 30th of June, in particular for 2023 with the price of our energy sales, applying indexation effects, a positive commercial impact on our historical businesses. Operating -- fixed operating expenses were up with a rise in maintenance and payroll costs in France, meaning that nonetheless, in France, we were able to maintain a large part of these positive effects. Very different thing internationally with a decline in the business with emergency interventions in Southern Africa and in depollution business, as we mentioned, and variable operating costs, which were adjusted down EUR 8 million, consistent with the decline in business. This reflects, as we've seen during the pandemic, our ability to adapt and adjust our variable costs in the event of a decline in the business. Looking at operating income, a similar trend as for EBITDA with constant scope, ROCE going up to EUR 305 million, operating margin from 10.2% up to 11.2% and a strong performance of our French business with integration costs coming out in terms of COI. We have an increase in provision allocations in France with the same amount as at 30th of June '23 with an added item for the first half. Looking at the -- between operating income, nonrecurring income, we have nonrecurring items to the tune of EUR 8 million, EUR 7 million of which for the establishment of our functionalities for France, which were not used, and then the go-live implementation since 2023. For external growth, EUR 0.9 million for -- we have the financial results, which is down by EUR 3.7 million, arising from the increase in gross debt, which is due to acquisitions and 2.56% to 3.49%. We have -- that's for QP. We have income tax down slightly. We've gone from 28% to 25.8% taxation rate with the current level, which is close to the weighted average for the standard setting level. Minority interest mainly reflect our partners be in South Africa, which comes out as a net income group [ share ] from EUR 44.6 million to EUR 47.8 million, which enables us to recommend a dividend, which is up -- which will be up from EUR 1.10 per share to EUR 1.20 per share. Now we have control of our industrial investments, as you can see, after 2022, EUR 105 million. We're down to EUR 97.2 million in industrial CapEx. Recurring CapEx is mainly reflecting health environment arising from regulatory changes, which are becoming more strict. Looking at the cash flow. We have operating cash flow, which is due to the increase in EBITDA and the other half to variation in working capital requirements, which were better managed in 2023 at EUR 6.3 million, meaning that we were able to go to a cash conversion rate of 47%, up from 39%. Looking at our debt load, we are seeing a net debt reduction on a like-for-like basis through the generation of cash flow and control over CapEx. At constant scope and excluding noncash effects, we would be at EUR 54 million. And post-acquisition and including IFRS 16, at end of '23, we come out at EUR 641 million. However, we still have a strong cash situation, EUR 332 million in free cash with a balance sheet that remains robust. Financial leverage is at 2.9, restated for acquisitions in 2023 -- in the last quarter of 2023. With Essac and Furia, we would have been at 2.7x. And including the EBITDA for these acquisitions, we would have come out at 2.7x. So this, again, reflects our solid credit standing. Now the objectives for 2024, you -- there's nothing very new in these tables. We've shown you the table for the nonrecurring effects. In order to be clear on this particular item, bearing in mind that we presented these items during the Investor Day. This is mainly the energy price effect coming out at EUR 9 million on the EBITDA. STEI, approximately EUR 3 million on items arising from integration. And the contributions of acquired scope for 2023, we've put this under nonrecurring items. These items will give rise to adjustments in 2024. Now restating these items, we come out with adjusted revenue of EUR 895 million. This enables us to confirm our guidance for 2024, which we indicated at the Investor Day. In other words, revenue up 5%. EUR 1.1 billion contributed revenue expected for 2024 and EBITDA, EUR 200 million -- so this does not change our forecast for 2026. Allocation of cash flow with 2024 CapEx to stand at EUR 100 million to EUR 110 million. And work -- on the working capital requirement, which has begun, which will be stepped up in 2024, all the way through to 2026 to avoid deteriorating the WCR, notwithstanding the increase in the business, which we expect. Strong financial discipline, of course, will be maintained with a goal for 2024 is to have leverage of 2.7 and the invent of acquisitions financial leverage to be below 3. We see the repayment schedule, which is fairly even, fairly flat. And we have the drawdown of renewable credit lines with maturity of 2028, where we're adjusting our drawdown to every 6 months. That's why it's on current debt maturing 2028 and soon 2029. And clearly, for us, it's important to keep this flexibility in terms of refinancing and to maintain strong credit quality for the group as a whole. I'm coming to the end of the presentation. So we're ready to take your questions. Manuel, do we have questions?

Good morning. Three questions from Alexandre Letz from Gilbert Dupont. They're financial questions, mainly. What is the use of the industrial tool and act? To what extent can this contribute positively in 2024? Second question, can you account for the EUR 7 million of provisions arising from year 2? And third question, should we extrapolate the taxation rate to -- from 2023 to 2024? Or should we look at a return to the historical taxation rate of 28% approximately?

Right, the use to date [indiscernible], I'll recall Investor Day, which was presented for Investor Day. I don't -- I will try to be as accurate as possible here. What we said is that we had reserves of available rates to 2026. Action plans were presented for the operating section. And we -- there were operating items arising from the increase in the availability rate by 2026. And also savings plan, which was presented, we have goals, which have been set for 2026 through 2024, of course, should reflect a positive impact, which is what we expect and which has -- for which we have not set figures. It's a gradual increase, as we indicated, based on the action plans and on the savings plans and the availability rate. Regarding ERP provisions, let's be clear here. There is a budget -- deployment budget for the ERP plan, EUR 14 million, which has been used given the implementation on go-live of the test conducted since July 2023. We have waste management capacities that have not been used. It's a challenge for an ERP to be able to deal with these waste activities. The service activities are running smoothly. So it's only on the waste segment or waste management segment that these measures have been taken. These are not provisions. These are temporary allocations. So our goal is to use the ERP. So we're not waiting for this level of reserves for 2024. Can we extrapolate the taxation rate for 2023 to 2024? There are two items -- two points here. First of all, we would like to keep the tax rate at the level of 2023. That is indeed our goal. But if there is a very strong pickup in the country where the taxation rate is much higher, for example, South Africa, then mechanically, our taxation rate will go up. So we would like there to be dynamic recovery in South Africa and potentially that means that we would be somewhere between our average rate -- the normative rate and the historical rate.

Arnaud Palliez from CIC Bank. I have three questions. My first question is could you give us an idea of the nominal STEI margins once the integration has been finished, that could be EBITDA or recurring operating profit? What should we expect in terms of performance for STEI? My second question is on energy costs and how the indexation clauses are activated or not in 2023? Are we expecting changes in energy costs? And finally, and this is quite topical, there have been a large number of climate events in France, flooding in the north, especially. Is this likely to generate some nonrecurring depollution business for you?

I'd like to step in on that third question. From the perspective of our business and our environmental crisis intervention, the flooding in the north is precisely where we expect to provide added value with industrial players as we support them, as they face an environmental emergency, some kind of climate event that they didn't expect. So yes, that's part of our business, and we have presence in that region, and we're there since the beginning of the year to help them with the flooding.

On STEI's operating margins, we were able to acquire a portfolio of contracts that is a set of medium-term contracts with a spread of maturity dates. We're aiming for 15% margin rate for EBITDA. So that's what our target is. That is lower than margins elsewhere in the group. But as I explained, these are services that are less capital intensive. To achieve 15%, we need to, first of all, as I explained during the last meeting, well, right now, we are still very dependent on the vendor for a number of subcontracting contracts. Those contracts are going to disappear over time because we're working to be fully autonomous, and that should be the case in a couple of weeks. So there are fees that are going to disappear as we take in-house some of those functions. Also, there have been one-off effect that we experienced throughout 2023. These were mainly related to integration costs and to issues with clients because there were some situations where we weren't immediately able to maintain the same level of service. So that is that EUR 3 million negative item that I described. Next, we have sales effects and the return back to nominal margins, as I explained. And this is work that is going to take years. We're not going to immediately be at nominal margin rates that I expressed. But that is our target, that 15%, and we will have the opportunity to come back to that at some point in the future. We'll be looking at integrating that entire scope at that operating margin, and that's even without taking into account all of the other synergies with our other industrial activities. On your second question, the cost of energy now. Indeed, there are changes in energy costs right now. And that is why, we don't normally do this, but we have, in this case, given you the most precise forecast of EBITDA and recurring operating profit that we could, given the restatement that we've done based on energy costs in 2023 and the indexation clauses, and they're triggering in 2024. Mainly, as you can see on recurring operating profit, we're back to our historical levels. If you remove energy costs, we end up much lower as we expressed for recurring operating profit. And through our working acquisitions, through our work on our existing setup, we are able to get back to that EUR 105 million as expected, and we already answered the flooding issue.

Jean-Francois Granjon, BHF. Could we go back to the international business. You talked about the very strong base effect last year and even stronger in the last quarter with a decline in the 7%. How -- what is your forecast in 2024? Do we have growth assumptions for Europe, LatAm, South Africa? That's my first question. My second question, when we look at your forecast for 2024, we see there's a slight decline in EBITDA margins. Is this due to the integration into the scope of acquisitions from 2023 or the impact from STEI? So does this mean that we will see an improvement in margin from 2025 onwards to reach the road map targets by 2026? And last question, in guidance for 2024, you're looking at growth of EBITDA compared to 2018, restated 2023. So we have a COI, which is similar to that of 2023. So will -- in order to have -- what happens between EBITDA and EBIT?

Looking -- first of all -- in the international business, first of all, as you can see and as you've understood for -- in most regions, our business is normally displaying a flat growth. But intrinsically, it continues to grow when you restate nonrecurring items. So look -- when you look per region, there is no break in the trend here. We still have volume growth in Italy. So in Europe, this means that we expect growth to continue, and we're continuing to see a strong order book for our business for -- globally. We are seeing strong momentum in LatAm. And as I was saying for Southern Africa, restating for ForEx effects, the Interwaste situation should continue to improve with the restatement of businesses and depollution business, which continues to grow. And overall, I think we've reached a trough looking at emergency interventions for Spill Tech. And I think that the business should be sustained unless we are faced with crisis events of any significance in 2024. And of course, we don't have visibility on that. Now you were right to say, as we're posting it, nominally, we have a slight margin decline in 2024 when we restate the EBITDA margin. And you're right in saying, it's always the end part that we have on costs related to STEI. There's still some items which are having an impact in early 2024. They're commercial items, which will have an impact for part of 2024, and that's why we're giving you the outlook to 2026 because I don't know at what speed we're going to be able to turn that business around, but it will happen either in the second half of 2024 or in 2025. Now coming to restatement arising from nonrecurring items such as energy prices or integration cost, you're right. There's the energy aspects or components and there's the STEI component. So there are items, which are -- which come out as client penalties, which are put under EBITDA and others are put on the COI because some items have been provisions while we await the result on that particular aspect. So there are some items, which come between EBITDA and COI. And that's why we're saying earlier that overall, we're able to offset the whole loss due to energy prices with an improvement -- with the impact on COI with an integration and synergies on the acquisition side. And there's also -- there are also penalties where provisions are booked where we haven't factored in an improvement in 2024. So we'll see as the year goes along, whether we can claw back those provisions or not.

I have a couple of questions on my end. Let's come back to STEI briefly. As we understand, the transfer of contracts was done at the end of 2023. Out of those EUR 60 million in scope effects, that you've announced for 2023, is that part of that? Or is the full year effect of the contracts included in that EUR 60 million? And just to be sure what that EUR 60 million is, is it adjusted? Does it include the EUR 17 million from the first half? Or is it starting from 0? Will there be cash outlays to -- for acquisitions in 2024, earn-outs for Rent-A-Drum, for example, is part of that going to be paid out in 2024? And can you also share with us EBITDA per region, like LatAm was the last one, yes? And finally, on South Africa, in a broader sense of the term beyond ForEx, it seems that there's a little bit of organic growth in 2023. Are you expecting more of that in 2024? Were your ambitions not higher for organic growth when you did the acquisition in South Africa?

On the scope effect, that is due to Furia and Essac and that's in 2024. Some cash outlays, yes, there will be some potential earnouts to be paid in 2024, EUR 2 million or so as a follow-up payment, and that's not going to have a significant impact on debt in 2024. And that's going to have a positive impact on the business because that means that the business will be doing well. EBITDA per zone, no, but a nice try, especially, is there a final question, you might slip it through. Now South Africa, that's a good question. As to the question whether we're in line with our initial plans, we are in line with our initial plans when it comes to development and regulatory changes. So we carried out the investments. We obtained the licenses that enable us to manage hazardous waste. So we're in line with our initial plans. As to whether we have high ambitions in South Africa, yes, we have high ambitions in Africa, and we believe that regulatory changes are going to create resilient growth -- strong resilient growth in the region in the coming years. It's true that the current snapshot is maybe a little disappointing in terms of growth numbers. But I would caution you, it's important to not allow ForEx to distort your vision. That was a big impact. And once again, this shows the resilience of our legacy businesses in that scope to have the results that we did, when we're talking about a country that has 0% growth overall. So we're continuing to grow in a country where growth is basically negligible. That business should also be understood as cyclical. It's Spill Tech. It's based on problems when they occur. There is a kind of a baseline floor amount. And then there are nonrecurring items that come in and they come and go as we saw in 2022.

Question from [ Bryan Tennant ] from [indiscernible]. In your management of the WCR, the factoring of the consolidated items, what would be the amount by the 2023? How will it vary over the year? Do you have the leasing debt at the 31st of December 2023? That would be most appreciated.

So Manuel, you can seek out for us the leasing debt for 2023. Now on the WCR for consolidated items, this is the -- that was EUR 40 million at the end of 2023. And we've included the new scopes, STEI and Triadis, which were at 2026 at the end of 2022.

And the -- hello yes, the leasing that stood at certain 70.27 compared to 65.2 in 2022. And this is all under IFRS 16.

Regarding international margins, is the goal still to go back to 20% EBITDA margins by -- with what time line? My understanding is that sometime going back to margin levels similar to those of France, still the challenge in France. We had margins of 25%, unchanged scope, which is a very high level. Of course, energy has an impact. What would be -- if we restate energy, what would be the impact? And is this a sustainable margin level or on the normative levels? What are your forecast?

Well, first of all, for the international business, we are still looking to go back to margins of 20%, and this is consistent with the plan that we presented at the Investor Day. So this is still our plan or goal by 2026. Given the trend of the French margins, so we do one thing at a time here. Once we get back to 20%, then we'll revisit those margin targets, but it takes time. As you can see, I was explaining our strategy to improve our margins to moving towards our historical businesses in France and applying that to South Africa and the fact that we're shifting to high value-added services. All this takes time. And of course, we're allowing ourselves time, but we're keeping the same goals. That's the first point. Second point, on the French business, well, we have been fully transparent there. Looking at the energy component, we've given you the EBITDA impact of EUR 9 million. You can restate that particular item fully. If you so wish, you can withdraw the nonrecurring items. You can add the energy price impact. We're very open about that. We've been transparent about the EBITDA margin from a standard setting standpoint. Now once we've dealt with nonrecurring items, we don't anticipate any significant negative trend in 2024 because we're not seeing any break, a reversal of trend in the French markets. So once we've restated nonrecurring items, we're still on that same track in early 2024.

A follow-up question from my end on your acquisition policy. We've understood through the Capital Market Day that you were slowing down your acquisition rate. Is that still the trend? Or are you expecting a lot of kind of spontaneous acquisition transactions going forward, things that come up, which may lead you to continue with your acquisitions?

Well, we haven't identified any new targets, but we still have active overwatch. Easy answer.

Are there any further questions? In that case, we would like to thank you for your questions and also for your presence with us this morning and would like to offer you refreshments in the form of coffee for those of you who are here in our offices. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]