Solutions 30 SE (S30) Earnings Call Transcript & Summary

Secretary and Jonathan, our CFO are by my side to comment on the Q1 '24 revenue. We will then answer your questions from the chat at the end of this presentation. In the first quarter 2024 our group revenues were up -- were at EUR 265 million, up 3.8% compared to Q1 last year. We continue to benefit from a strong momentum in Benelux with a growth over 21% against a very high comparison basis. Q1 was another confirmation that energy activities are a powerful growth driver for the group. They grew by 36% in Q1 and by close to 48% in France, where the rebalancing of our business mix is progressing in favor of these activities. As you already know, in the second half of last year, we voluntarily slowed down our telecom activity in Italy due to a difficult situation with our main clients. This has created a temporary decrease in our Italian revenue. Excluding Italy, our growth in Q1 was 6.7%. Concerning Italy, we have made good progress in the last month, and we anticipate to resume a normal activity in Italy with a better economic model in the second half of the year. We will come back to this later in the presentation. Lastly, we confirm our outlook for the full year. As said, visibility has significantly improved in Italy. Also in Belgium, the situation concerning the coming elections is getting better. Recent planning sessions that we have conducted with our clients give us confidence that we can minimize the impact of the upcoming elections by anticipating work in the city centers now. In Germany, growth will accelerate significantly through the year with the ramp-up of fiber deployment. As a result, our revenue should grow over the full year at a higher pace than in Q1. Our adjusted EBITDA margin, as previously announced, is expected to make further progress towards the double-digit normative level. I will now pass to Amaury.

Thank you, Gianbeppi, and good evening to everyone. Let's now take a look at how the growth was generated during Q1. With an organic growth of 21.6% Benelux remains a driving force. This growth was achieved on a very high comparison basis since we grew by 77% in Benelux in Q1 last year. The fiber activities are still growing strong and energy is growing double digits. In France, we are progressively rebalancing our activity mix towards energy, which is a balance market at the moment while managing our decrease in connectivity with stringent contract selectivity and a strong focus on margins. Energy was strongly up in Q1 by 38% organic while connectivity was down 10%. Given the relative size of these businesses, the net was an organic decline of 4.9%. In Italy, revenue was EUR 6 million lower than in Q1 last year. As you already know, we have voluntarily slowed down our fiber activity there since H2 last year due to a difficult situation with our main clients. As said by Gianbeppi in the introduction, negotiations with these clients have moved in the right direction, and we now anticipate a positive outcome for the situation with back to normal but with better conditions at some point in H2. Excluding Italy, other countries were up 3.1% organically with solid growth in Germany, where fiber activities will start ramping up in H2. We do expect Germany to become our third pillar alongside France and Benelux and to drive a continued high level of organic growth for the group. At group level, organic growth was plus 6.2%, excluding Italy, and plus 3.4% in total. On top of that, we have a EUR 1.2 million positive impact from the consolidation of ELEC ENR, a French specialist in photovoltaic, which we acquired in July last year and which is being successfully integrated in the group. I will share with you the details of another acquisition we just made in France also in the solar sector, and we are actively building up capabilities in this promising market. Going forward, we intend to continue seeking targeted acquisitions in an opportunistic way and play an active role in the sector's consolidation in Europe. Looking now at our Q1 revenue by activities. Energy activities revenue grew by 35.9% to EUR 36.9 million in Q1. Quarter after quarter, the energy transition is proving to be a powerful growth driver for Solution 30 as we are successfully deploying our business model in activities directly related to renewable energies. The solar market, in particular, is buoyant and especially in France, where revenue doubled in Q1 and where the commercial activity is very dynamic. In Belgium, we have recently won a contract with Flanders for low-voltage green modernization in order to adapt its new electricity needs commended by the energy transition. This paves the way to a new diversification in a dynamic market where our business model combining versatile technical skills and the ability to manage a large number of interventions on a large territory in a short period of time is extremely relevant. Connectivity revenue was up 1.4%. This moderate growth reflects the different stages of fiber deployment and connection in the various countries where we operate. France and Spain are major markets where we are managing a revenue decrease by being selective and focusing on profitability over volumes. On the other hand, the same activities are generating significant growth in less mature countries like Poland and the U.K. and we generate even more significant growth in Germany starting in the second half of this year. Technology posted revenue of EUR 25.7 million revenue in Q1, down by 9.5%. And lastly, in terms of geographies, as you can see on the right, Benelux is confirming its position as a #1 geography in the group in terms of revenue and it's just past the EUR 100 million mark for the quarter following a strong growth of 21.6%. This shows that we have successfully deployed our model in this region where we have built a leadership position and captured strong market growth. I will now hand over to Jonathan for further details on Benelux.

Thank you, Amaury, and good evening to all. I will start with Benelux, which is now the largest contributor to group revenue. Revenue grew significantly by 21.6% compared to the first quarter of 2023. Energy was up 14.6% at EUR 16.7 million, driven by the continued rollout of digital meters in Flanders. With the grid modernization contract we just won that Amaury mentioned, we will be in charge of upgrading more than 1,000 kilometers of low-voltage network to adapt a new electricity usage. This is opening the path to a new diversification in energy and further growth opportunities. Connectivity revenue was EUR 78.7 million, growing 24% year-on-year despite a very high comparison basis as growth in Q1 2023 was plus 92%. The ramp-up of fiber activities continued at a rapid pace despite very harsh weather conditions in the winter months, which impacted the outdoor deployment activities. Regarding the upcoming elections in Belgium, our local teams are working closely with their clients in order to adapt and optimize planning and organization through the election period. As a result, we now believe that the impact of the election on the actions of the -- on the pace of the fiber deployment should be minimized. Technology revenue was EUR 5.3 million, up 11.6%, driven by the good trends in IT support services. I will now pass it back to Amaury for an update on France.

Thank you, Jonathan. Revenue in France was EUR 97.9 million in Q1, down 3.7% year-on-year. We are currently moving ahead with the rebalancing of our business mix in France towards a higher share of energy activities. Energy delivered remarkable growth of plus 47.2% to EUR 17.5 million revenue in Q1. These activities are benefiting from strong tailwinds fueled by the energy transition and the ever increasing importance of renewables in the country's energy mix. Revenue from Renewable Energy's activities doubled in Q1 and grew by 84% organically, driven by the ramp-up of large photovoltaic infrastructure projects like the construction of the largest floating solar farm in Europe in which we are involved alongside Q Energy. In addition, the recent ENR law mandating the installation of photovoltaic panels on outdoor car parks exceeding 1,500 square meters, is triggering a dynamic commercial activity in the renewable energy sector. Our strategic expansion in the energy sector is also bolstered by M&A. After the acquisition of ELEC ENR last year, we finalized in Q1 the acquisition of a minority stake in So-Tec. So-Tec is an installer of photovoltaic structures based in the South of France. We plan to progressively increase our stake and anticipate consolidating approximately EUR 20 million of revenue from this entity in 2025. Connectivity revenue of EUR 64.7 million, down by 10.3%. The fiber connection market slowed down in Q1, while the maintenance market was broadly stable. In this context, we are managing our revenue decrease by maintaining stringent contract selectivity, always prioritizing margins over volumes. As maintenance constitutes an increasingly significant portion of the connectivity market, we are gaining competitive edge as a leading player in such activities, which demands the capability to ensure swift interventions at users' residence wherever it is located. Revenue in technology was EUR 15.6 million, down 11.5%. This slight decline was attributed to lower volumes in IT support services. However, we anticipate better trends for the rest of the year and especially with the forthcoming Paris Olympics, which are expected to generate opportunities in the payments and IT support activities. Back to you, Jonathan.

Thank you. Looking to the other countries, revenue was EUR 66.5 million in Q1, down 6.2%, but up 3.1%, excluding Italy. As mentioned before by Amaury, we have voluntarily reduced our fiber activity in Italy since Q3 last year due to poor organization and planning from our main clients. We are currently negotiating with them in the framework of legal protection and these negotiations have clearly moved in the right direction so that we expect the situation to be resolved and to be able to resume normal operations at better conditions at some point in H2. So this is definitely good news. Germany, which is now the biggest country -- revenue contributor of the geography, with EUR 18.2 million in Q1, delivered solid growth of 12%. This was driven by a high maintenance activity on coax networks. Regarding fiber, you remember that we were awarded major contracts last year. Based on planning that we have -- that have been established with our clients, deployment will start ramping up in the second half of this year and fueling the growth of the whole geography. The German fiber market has a huge potential and will allow the group in the medium term to benefit from a third pilot alongside Benelux and France and to sustain high level of organic growth. In Poland, we continue to roll out our fiber business successfully, and revenue in the country was up 25% in Q1 at EUR 14.6 million. In Spain, where the fiber market is more mature, we are applying the same management principles as in France that is managing the revenue decrease, minus 26% in Q1. By focusing on margins rather than volumes and developing the more promising energy activities. Lastly, in the U.K., revenue was up 10%, thanks to a good momentum in connectivity. With that, I will hand over to Gianbeppi for the outlook.