SPIE SA (SPIE) Earnings Call Transcript & Summary

Hello, and welcome to the SPIE 2020 Full Year Results Conference Call. My name is Val, and I will be your coordinator for today's event. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Mr. Gauthier Louette, Chairman and CEO, to begin today's conference. Thank you.

Good morning, ladies and gentlemen, and thank you for attending SPIE's conference call for our 2020 results. 2020 was an unprecedented year in many ways. And I first want to thank SPIE's 45,000 employees for their outstanding response to the challenges presented by the pandemic. They went to work no matter what. They never let one customer down. In 2020, we demonstrated the strength of our model, the mission-critical nature of our services, our balanced geographical footprint, our rigorous safety management and the dedication of our teams. All this translated into a remarkable revenue and margin resilience and a cash generation as strong as ever. Facing the COVID-19 sanitary crisis, we have continued to deliver the highest quality of services to all our clients. And I would like to highlight 4 examples to illustrate it. In Germany, we upgraded the Lubmin transformer station for [indiscernible] in order to accommodate renewable energy supply coming from wind farms at Baltic Eagle and Arcadis Ost 1 wind farms to connect them to the electrical grid and especially to the centers of consumption in the south of the country. On Slide 5. We're involved in the smart space project to install IoT-based smart sensors on public lighting systems across Europe. This project is targeting a 60% reduction in energy consumption, will allow to control and dim the light intensity based on usage. It is a good example of how SPIE services are key to energy efficiency. In the Netherlands, we have designed and installed the first CO2-negative data center at the high-tech campus in Eindhoven. It is 100% powered by renewable electricity, and the residual heat is recycled within the campus. This project was a winner of a DatacenterDynamic EMEA award. And on Slide 7, you see airline companies may be having a difficult time, but mission-critical services must go on. In France, we won a technical facility management contract for the industrial sites of Air France at Charles-de-Gaulle and Orly airports. This 5-year contract showcase our IoT-based innovative maintenance tools, such as Smart FM 360. We will help air France to reach ambitious targets for the decarbonation of the industrial sites. And now moving to our highlights for 2020 on Slide 9. In 2020, in this large-scale context of the sanitary crisis, SPIE demonstrated its strengths. After a contained and well-managed impact in H1, we had a solid recovery in H2 despite stepped-up COVID-19 restrictions in most countries in Q4. Over the full year, our results did show remarkable resilience. Our cash performance in particular was very strong throughout the year and translated in an outstanding deleveraging. Regarding climate change, SPIE is definitely on the side of the solution. The green share of our revenue per the EU taxonomy increased to 41% in 2020. And we have stepped up our commitment to reducing our own carbon footprint with an objective by 2025 of a reduction of 25%, in line with a 1.5-degree trajectory. Moving now to the financial highlights. In 2020, our revenue was very resilient, down only 4.7% with a 5% organic contraction. EBITDA margin was maintained at a high level at 5.1%, down only 90 basis points compared to 2019. Free cash flow reached a record high at EUR 323 million with 139% cash conversion. And we achieved an outstanding deleveraging. The group's leverage is now 2.4, coming from 2.7 at the end of 2019. Finally, we propose to resume dividend payments at EUR 0.44 per share. Looking at the organic growth on Slide 11. Q4 confirms a trend already observed in Q3 of a firm business recovery following a strong impact of the sanitary crisis in Q2. All together in H2, organic contraction was limited to minus 1.4%, demonstrating our strong resilience. This resilience reflects SPIE's fundamentals. Our services are mission-critical for our customers. We have always maintained with them very close proximity. And we have a balanced geographical footprint with a high exposure to Germany, which has shown clear benefits in 2020. But it also reflects the powerful trends that are increasingly driving our business, the energy transition and the digital transformation. I mentioned it -- moving to Slide 12. I mentioned it, our strategy to pursue balanced geographical development with a focus on Germany and Central Europe has shown clear benefits in the context of the COVID-19 crisis. France by far suffered the most severe impact with revenue down 9.8% in 2020, while Germany and Central Europe remarkably managed to grow their revenue by 3.4%, including a positive 0.2% organic growth. It is for Germany alone an organic growth of 1.1%. Northwestern Europe was very resilient, down 2.7% only on an organic basis. Oil and gas and nuclear was down minus 9.6%, which is not a bad performance considering the severity of the downturn experienced by the oil and gas industry. Overall in 2020, group's revenue was down 5% organically and 4.6% including the impact of acquisitions and disposal at constant FX. Looking at our margins on Slide 13. Our EBITDA margin was very close to 2019 level in H2. If we look by quarter, Q1 was stable EBITA-wise compared to 2019 despite the very first impacts of COVID-19. In Q2, at the height of the crisis and the most drastic containment measures, our EBITDA margin was down 340 basis points. A sharp recovery followed, with Q3 margin down only 50 basis points, and Q4 margin identical to 2019, quite a remarkable achievement. Over the year, our EBITDA margin reached 5.1%, down only 90 basis points compared to 2019. And then on Slide 14. Regarding bolt-on M&A, we could not do much, obviously, in the first half of the year because the crisis put a halt of -- to acquisition processes. However, M&A activity resumed as soon as the impacts of the crisis on target company could be assessed and the normal course of negotiations could resume. This has led us to sign 2 bolt-on acquisition, Planen & Bauen in Germany, the data center experts with capabilities in design, execution planning and supervision. This company employs around 60 people, generates revenue of EUR 10 million with a high margin and a good access to an excellent base of customers. And in Poland, we acquired the company, Energotest, a specialist in automation services for power and industrial plants. It employs 150 people and generates revenue of EUR 12 million. It will allow to expand our footprint in Poland into new segments, such as photovoltaic installation, wind farms, or combined heat and power plants. This company has a very good relationship to also important customers of SPIE. In 2021, we intend to be back full steam with bolt-on M&A. As you know, it is a strong driver to our growth. It is low risk, self-financed, and it makes perfect sense on highly fragmented markets like ours. On average, over the 2006-2020 period, bolt-on acquisition added 3.5% revenue growth every year, and we paid a very reasonable 5.8 average EBITDA multiple. Now looking at our 4 segment, starting with France. We had a good recovery momentum in H2. And all together, France has delivered a very satisfying performance given the severity of the lockdown that took place in Q2, which was by far the most severe in all the countries where we operate. That business recovered rapidly in H2 with the dynamic momentum in all division. And the second lockdown is -- in Q4 didn't affect a lot our operation. So the H2 organic decline was limited to 3.5%, and EBITDA margin gradually recovered only 50 basis point below 2019 level in Q4. And I would like to stress that cash collection has remained outstanding throughout the year. All in all, this is a resilient performance, highlighting yet again the mission-critical nature our services and the quality of our customer portfolio. In Germany and Central Europe, on Slide 16, the activity remained dynamic. And I think it is worth noting that, this year, this segment is the largest contributor to our EBITDA. I will focus on Germany, which grew organically by 1.1% despite the context. The energy transition is increasingly driving our growth as we posted record revenue in both high-voltage activity, plus 7% organic, and distribution network services, plus 6% organic. So really, the acquisition of SAG has really proven extremely successful and big support to the group. Technical facility management remain dynamic. Building technology and automation services decreased partly due to the project phasing in the data center activity. But this activity nonetheless benefits from very good trends, and they will be seen in '21. EBITA margin remained robust at 5.8% in Germany and 5.1% for the segment. And this came back very close to [indiscernible] 2019 level in Q4. And here again, the cash collection has been excellent. In Northwestern Europe, Slide 17, we did show good revenue resilience at minus 2.7% organic. And EBITDA margin actually improved markedly thanks to the Netherlands. In the Netherlands, COVID-19 was [indiscernible] had very little impact on activity. These activities firmly driven by customers' investment in the energy transition while our main customer is [ Tenet ]. But it is also driven by the upgrade of water management infrastructure with restructured start. The only difficult part was industry services, which were impacted by particularly low demand from petrochemical customers. EBITA margin improved significantly, resulting from the successful delivery of the 2019 performance initiative, including progress on [indiscernible] the former Ziut. So a very pleasing progress in the Netherlands. In the United Kingdom, revenue was resilient, too, supported by our data center activity. Following the disposal of the mobile maintenance business, SPIE U.K. underwent major reorganization with benefits in terms of EBITDA margin already well visible in H2 2020. And SPIE in Belgium, we had a strong recovery in H2, driven by good trends in transport and energy infrastructure. And finally, oil and gas. The Oil & Gas and Nuclear segment never fails to deliver a high margin, whatever the context. In oil and gas services, we did very decently in a particularly tough context, combining COVID-19 constraint and a disrupted oil market. Revenue contraction was contained to high single digits, which reflect our focus on recurring maintenance and operation as well as the success of our diversification into downstream activities. EBITA margin was well-protected thanks to a swift reorganization very early in the year. And we are starting to work for our oil and gas customer on renewable energy projects. They move to this field, and we do tagalong. It is clearly something we want to develop, and we had our first successes in this domain. In nuclear, maintenance services were very resilient, while some Grand Carénage activity had to be postponed due to COVID-19 constraints. EBITA margin remained high. And we see all together solid trends in this activity going forward. Now we'll hand over to Michel, who will comment on financial performance.

Thank you, Gauthier, and good morning, everyone. I am on Slide 20. As Gauthier already pointed out, we achieved a robust performance in this unprecedented context. Group revenue was EUR 6.642 billion, down only 4.7%. EBITA was EUR 339 million. Our EBITA margin reached 5.1%, down only 90 basis points. Adjusted net income was EUR 176.6 million, which equates to EUR 1.10 per share on a fully diluted basis. Reported net income was EUR 53.2 million. Please note that the 2019 numbers used for comparison have been restated to account for the contribution of SPIE U.K. school facility management activity in the U.K., previously under a divestiture process. However, the impact is meaningless, and we remind you, the 2019 numbers published on the right side of this chart. As you can see on Slide 21, excluding ForEx, our revenues declined by only 4.6%. This includes a limited organic contraction, minus 5%; a positive impact from last year acquisition of plus 1.3%; and a negative impact, minus 0.9%, from the disposal of our U.K. mobile maintenance activities, which occurred in March last year. On Slide 22. The EBITA by segment demonstrates the strength of our geographic diversification and the clear benefit from our strategic development in Germany and Southern Europe. With EUR 121 million of EBITA, this region was the first contributor to the group's EBITA in 2020. It's also worth to notice the very good progress made in Northwestern Europe, which contributed EUR 49 million. Our adjusted net income group shares stood at EUR 176.6 million, down 22.6%. This decrease mirrors more or less the decrease in EBITA of minus 18.9%. As financial charges, I mean, the sum of the net interest and the other financial charges you see on this chart, overall were roughly stable, EUR 78 million compared to EUR 80 million last year. And so was the adjusted tax rate stable at 32.2%. On Slide 24. The reported net income group share amounted to EUR 53.2 million. Amortization of allocated goodwill was EUR 54.9 million. Restructuring costs were EUR 24.2 million, and related to reorganization made in the U.K. in oil and gas services in the Netherlands, and more generally, in activity sectors particularly impacted by the sanitary crisis, such as aeronautics or events in France and Germany. Other nonrecurring items of minus EUR 57 million, as already mentioned, this mainly includes the impact of the disposal of our U.K. mobile maintenance activities in March for minus EUR 46 million. On Slide 25, our free cash flow reached a record high in 2020 at EUR 323 million. So this is excluding the impact of IFRS 16. This was the result of a very strong working capital inflow reflected in a 139% cash conversion ratio. As you can see on the slide, over the last 11 years, we consistently delivered a cash conversion above 100% every year. This is North America. It's just a result of a permanent effort to improve working capital year after year. We had already the opportunity to -- in previous publication in 2020 to highlight that the cash collection has been excellent in 2020 across the group and throughout the whole year. This reflects the rigorous cash management as well as the outstanding quality of our client base. And it has driven a 3 days underlying improvement to our structurally negative working capital, from 34 days in 2019 to minus 37 days in 2020. So on top of that, we benefited from taxes and social charges deferral schemes offered by various governments in our countries of operations, which represented 8 days at the end of 2020. I remind you that they were accounting for 15 days at the end of June. This will be paid back in 2021. So all together, our working capital was minus 45 days of revenue at the end of 2020. Looking now with the different components of our working capital. Our strong cash performance is a combination of 2 levers: obviously, first, a good collection of receivables, which have decreased from 51 days in 2019 to 49 days in 2020; and more important, a very tight invoicing with a reduction of accrued income from 48 days to 39, so more than 10 days improvement. And this is also the case for deferred revenue, which had increased from 21 days to 26. At the same time, and considering the impact of the COVID-19 crisis on our suppliers, we have been very careful to pay them promptly. And our trade payables decreased by 8 days of revenue. As mentioned on the previous chart, the strong increase in net tax and social liabilities is a benefit from government deferral schemes. The result of this is a strong decrease in net debt, down EUR 324 million to EUR 927 million, excluding IFRS 16. So our net debt at the end of 2020 is now below EUR 1 billion. Here, you see the strong operating working capital inflow on this chart at EUR 144 million. And I remind you that, in 2020, we did not pay dividend and that our M&A activity was low, which obviously helped. As a result, the deleveraging was quite outstanding. I'm on Slide 29. So given the context, this performance was outstanding because our leverage ratio went down to 2.4 at the end of 2020 compared to 2.7 at the end of 2019, which means that, broadly, we are back to the leverage we had prior to the acquisition of SAG in only 3 years. And we expect this leverage to decline further in 2021 on the back of a rebound in EBITDA and continued strict working capital management. Our solid financial structure has been a major asset through the COVID-19 crisis. We have no debt maturity before 2023. Our liquidity is very strong at EUR 1.8 billion, of which EUR 1.2 billion in net cash. Our credit rating remains unchanged, BB with S&P and Ba3 with Moody's. One word about IFRS 16 impacts. Again, the cash flow and net debt figures we presented on the previous slides were pre-IFRS 16. And while the impact is very small, you can see on the right side at the bottom of this chart, so EUR 370 million of net debt and no impact on the leverage, which is 2.4 as well. Dividend payment resumes. For 2020, we will recommend a cash dividend of EUR 0.44 per share, which corresponds to our usual 40% payout on adjusted net income. This dividend would be paid on May 27 subject to shareholders approval. We also intend to resume the payment of an interim dividend. The next one will be EUR 0.30 per share or 30% of the 2020 dividend. If approved, this payment would take place in September. This means that, in terms of cash, the total amount of dividend we would pay in 2021 would be EUR 0.57 per share, more or less the same as what we paid in 2019. This concludes my part. And I will now hand back to Gauthier.

Yes. Thank you, Michel. When it comes down to climate change, and I keep repeating it, SPIE is definitely on the side of the solution. For the second time, we have measured our contribution using the EU taxonomy for sustainable activities. The green share of SPIE's revenue has increased in 2020, up to 41%. This is a 6-point increase compared to 2019, which results from: A, an improvement in SPIE performance, 3 points; and B, precision and adjustment made to the EU taxonomy itself, which was still a draft when we use it for the first time a year ago. So this also accounts for 3 points. So what is in our green share? Our contribution revolves around 3 pillars of the energy transition. Improving energy efficiency. Here, the taxonomy will retain HVAC replacement, energy renovation, delivering at least 30% energy savings and technical solutions for new buildings that are 20% more energy-efficient than standards. The second pillar is the support of the shift to renewable electricity, primarily through transmission and distribution services as well as installation and connection of new renewable capacities. And in this regard, the number of countries which are not eligible last year in Europe, like among others, Poland, are now considered eligible. And then the third part is promoting sustainable mobility, services to charging infrastructure for electrical vehicles as well as public transport infrastructure. And I give you a few concrete examples. Starting with energy efficiency. So I will just mention the first one, which is a 15-year energy performance contract with the city of Korschenbroich in Germany through the modernization and refurbishment of the equipment like the municipal swimming pool heating system, target savings of 420 tons of CO2 per year. On Slide 35. And a few example of T&D services. So photovoltaic, we're in charge of the maintenance of 360 floating solar panels on the Lac de la Madone in the Rhone area in France. And then we work a lot on the electrical grid in order to increase its stability, again fluctuations of renewable power supply, which is obviously an increasing issue to deal with. And we did so in the Stuttgart-Mühlhausen substation in Germany. And finally, in clean mobility infrastructure, we're in charge of installing and then maintaining a network of more than 5,000 charging stations for the Grand Paris. It includes a recycling of the former Autolib infrastructure, which was left abandoned a few years ago. So at SPIE, we do contribute to sustainability, primarily through our services, but we also want to step up our own internal commitment. So today, we announced our objective to reduce our direct carbon footprint. It is our scope 1 and 2 emissions by 25% by 2025. This means we will bring our annual CO2 direct emissions down below 100,000 tons compared to a 2019 baseline of 133,000 tons. This target is consistent with the 1.5-degree trajectory as defined by the IPCC. As a pure service provider, SPIE's emissions are limited, 19 grams of CO2 per euro of revenue, and this comes primarily from our vehicle fleet. So clearly, the #1 lever would be a massive conversion of our fleet to electrical vehicles. This is an ambitious objective, and I'm pleased that the whole organization has embarked on the project. And then moving to Slide 38. In a world of tight technical resources, valuing human capital is key. We have 4 priorities in this field. Developing employee ownership. Following the success of our 2020 plan, employee funds are now the second-largest shareholder of the group, representing 6.1% of the capital. And we are among the top-10 companies within SBF120 for employee shareholding. Recruiting and developing people. In 2020, despite the COVID-19 crisis, we hired 3,900 people. And we welcomed 900 new apprentices, which is actually more than we did in 2019, where we had recruited 700 apprentices. The voluntary turnover remains very low at 5.4% in 2020. Focusing on health and safety. Always and everywhere, this is our overarching priority, translates into industry-leading statistic. And in 2020, we reduced by 20% the number of severe accidents, which is a progress 2 years in a row. Clearly, our safety culture has been instrumental in moving back to site and working safely in the current sanitary environment. And then we also progressed on Equal Pay Index from 84 in 2019 to 89 in 2020. So this is the Equal Pay Index in France. And clearly, there's a strong focus on gender diversity. We are working on targets in this regard, which will be announced soon. This ESG focus has been recognized by strong progress in external writings. We are rated by a number of agencies. You see here the most prominent. All of them significantly upgraded our rating in 2020. In particular, Sustainalytics upgraded our risk score to 17.2, which means low risk, from 39.4 previously. It is quite an upgrade. And it reflects our progress as well as a more in-depth analysis of our business. And in this regard of ESG, we are pleased to announce our next Investor Day, which will be dedicated to ESG, on the 20th of September. Please save the date. I think we have a lot to show you in terms of our commitment and progress in this area and how we contribute to the targets of the planet in terms of CO2 reduction. I'm now coming to the outlook for 2021. Obviously, looking forward, the sanitary situation continues to call for presence, but SPIE has demonstrated our ability to deal with it. So we expect in 2021 a strong rebound in revenue and EBITA margin, both expected very close to 2019 levels. Full year revenue to be acquired through bolt-on acquisition in the order of EUR 200 million and definitely a further reduction in the group's leverage. The dividend payout ratio remain at about 40% of adjusted net income attributable to the group. Looking longer term, as we have mentioned before, SPIE is well positioned to benefit from upcoming European stimulus plan. The energy transition and the digital transformation are strongly driving our business, are core to these plans, which are also connected to the European Gain Deal. Based on what has been announced so far in France and Germany, we estimate that the directly addressable portion of the stimulus in these 2 countries would account to EUR 10 billion for Germany and EUR 12 billion for France. Other countries where we operate are about to make [ Sierra ] announcement. Actually, [ Tenet ] announced a doubling their investment up to EUR 6 billion in Netherlands and in Germany. Other countries where we operate are about to make similar announcement, as I said. It is obviously too early to quantify what it could mean in terms of revenue for SPIE, but it is meaningful. These plans will bring additional growth to our activities, and they reinforce our confidence in a promising future. Thank you very much for your attention. And Michel And I are now available to answer your questions.

[Operator Instructions] And we do have a few questions in the queue. The first one comes from the line of Sylvia Barker from JPMorgan.

First start with one on working capital. So you've given us the 8 days from -- held from government schemes. That works out to about, I think, EUR 145 million. Just to be clear. If that all reverses in 2021, then it'll be a little bit difficult for your leverage to reduce again. So can you maybe just give us a bit of detail around that? How much of that reversal should we actually be penciling in and just to confirm that you will be reducing from the 2.4x year-on-year. And secondly, on transmission and distribution activities in Germany, could you just repeat the growth rates that you mentioned and maybe just expand a little bit as to how that developed during the year? I think you said 6% or 7%. Finally, in oil and gas. You said you've already had your first successes with renewable projects. Could you maybe talk about those renewable projects? And maybe just give a general outlook for oil and gas in '21.

Michel speaking. I will first answer your first question about working capital, and then I will hand to Gauthier for the 2 other question. First of all, working capital. Yes, you're right. The deferral scheme, 8 days. So it meets around EUR 140 million, and this will be paid back next year in 2021. Now we will still deleverage. Why? Because, first of all, the improvement in EBITDA. So don't forget that we managed to decrease this leverage in 2020 despite the fact that the EBITDA was badly hit in the second quarter, if you remember. And so we will decrease the leverage in 2021 on the back of an improvement in EBITDA. And of course, a continuing strong management of our working capital that -- and we anticipate, as usual, to improve. We used to do at least 100% of cash conversion. So excluding this reimbursement, we will do it again, and we'll try to do better as usual. And when you do the math, you will realize that it's quite doable.

Yes, and regarding transmission and distribution in Germany, we had a 7% growth last year in transmission and 6% in distribution. It's been quite a good year, again, not affected a lot by the sanitary situation as a lot of work takes place outdoors, you see, and a strong investments flow from our customers with a number of topics, including also e-mobility, which is handled by our distribution operation in Germany. So it is a very, very positive move in 2020, and the trends do remain robust. So I'm not advertising the same growth rate this year. It is early to say, but the trends are solid. And regarding oil and gas, we are -- we have followed closely the new strategy of the -- of our main oil and gas customers who move to renewable, even change their names in the process, as you know. And we have 1 -- 2 contracts already in this regard. So it is not bad to start with our domestic markets. So our 2 first contracts are not offshore Angola. They're offshore Normandy. But it is a good start. We will be involved in the electrical part of the platforms. So gathering the electricity from the various turbines and then transforming it before shipping it to onshore. So we'll be working on this installation. And clearly, this is a focus for the future for oil and gas activities. There's a lot of similarities with what we do, and clearly, competencies, especially in terms of electrical and instrumentation, can be used. But it is too early to say what sort of figures we are envisaging for 2021 and beyond. It is a start, a good start.

Okay. And can I just follow-up on Michel's answer just very quickly? Is that reduction in leverage including the EUR 200 million of revenues that you'll be acquiring as well, just to confirm?

Yes, Sylvia, I confirm. When we do -- of course, we will resume M&A, as we said. But with the usual strict discipline, we don't overpay the targets. And we restate -- when we calculate the leverage, we take a proforma, of course, of the target on the EBITDA. So it includes, of course, the M&A impact, which is a quite limited impact.

The next question comes from the line of Simona Sarli from Bank of America.

Yes. So a follow-up on the leverage question. So first of all, can you give us roughly an indication on how much you are expecting to delever in 2021? And then what is your leverage target for the medium term? And secondly, regarding the green investments. What are your expectations on timing of the addressable share of investments that you show on Slide 43? And related to the growth rate that you mentioned for Germany for transmission and distribution, how much of that would you say it's related to market growth versus market share gains?

Okay. First, on the leverage. You saw the trajectory on the slide for the past year. So usually, we have a decrease of 0.2, 0.3. So I think we should probably keep this in mind as an objective for 2021. Now I cannot say that we have a long-term target on this because our goal is to continue to deleverage. And then at one point in time, we see if we -- how this moves. But short term, we have an objective to continue to decrease. So long term, we'll see. We don't have a specific target long term.

So regarding our stimulus plans, well, we think that they will start to materialize in terms of call for tenders probably sometime in H2 this year. So I tend to -- in our forecast, we tend to include the impact of the stimulus plan more towards 2022 or maybe end of 2021 because, obviously, there's a lot of preparation to be done, especially from the public customers. An important element of the stimulus plan in France is the energy efficiency improvement of the public buildings, and this will take some time to materialize in form of -- in terms of call for tender. And then regarding T&D in Germany, we're the #1 on the market, #1 player, both in transmission and in distribution, so obviously -- and we are very disciplined in terms of margin expectations. So clearly, the market has grown. I think we'll at least maintain our market share. We offer excellent quality services. So we have at least maintained it, maybe growing it a little bit. I wouldn't know because, clearly, we remain extremely disciplined in terms of pricing and would also add an excellent cash collection in this area.

And if I may, sorry, just a follow-up. So on -- you mentioned that for the green investment, you include the potential impact mostly from the second half of 2021. But more importantly, in 2020, 2023, can you probably give us an idea of what are your -- what is your base case scenario in terms of 2020, 2023 related to the EUR 10 billion in Germany and EUR 12 billion in France?

I'm afraid it is too early to tell. There's a lot of uncertainty still. So I would not -- probably in the course of the year, we'll have a better view. But right now, it is too early to tell.

The next question comes from the line of Rory McKenzie from UBS.

It's Rory here. Just 2 from me, please. Firstly, on the outlook. Obviously, Q4 revenues were only minus 1%. Organically, margins were flat. So your business run rate is already very close to the 2019 level. So why don't you think that with more reopening aheads, some good tailwinds to parts of your business and you starting M&A, that you can't achieve 2021 results above 2019? Has Q1 started worse than that run rate, for example? Or is there anything else we should worry about? And then secondly, on working capital, you've been clear on the reversal you expect in the deferred tax. Can you talk about the accrued income reduction and the increase in deferred revenue? Are those components sustainable? Or should we also expect some reversal in those items in next year?

Well, first of all, for -- I mean, there's no reason to worry about the first quarter. So we expect that it'll look decent. But the world out here is not back to normal yet. It's still not always easy to work. We still have the odd case when -- because these are suspected COVID cases, a whole site is shut down or a whole crew is sent for quarantine, et cetera. So we're not working exactly normally. So we -- I think we're dealing well with the situation, but it's not back to normal. And we still have a number of customers who are by far not coming back to normal level of activity and being in the aeronautics industry, in the airport or in the entertainment segment. So this all calls for an element of caution. And this is why we -- so far, we do not -- we have not planned to be exactly back to 2019. So I think it is understandable under the current circumstances. But there's no specific thing to worry about, to answer your question.

Concerning working capital, if I understand your question, your -- in fact, you're asking if this underlying performance is sustainable. What I can say is that you know that the cash management is at, at all levels of the organization, is part of the DNA of the company. It has always been one of our strengths, and we have demonstrated again this year in this particular context. So I can say that all teams remain mobilized and close to our customers. They deliver an excellent job despite the context. And this has resulted in excellent collection of receivables and advances. We have also improved the aging profile of the receivables. So of course, customers, when they are satisfied, tend to pay quicker. And we have also, as you mentioned, improved in deferred revenue in accrued income. So our goal is to continue to deliver this good performance, and we do it year after year. So we have no reason to believe that we'll not do it again in 2021. This is what I can say.

Okay. I can understand how the accrued income days improved with a big focus and big discipline on invoicing. But within -- to get that improvement in deferred revenue days to minus 26, I mean, did you ask clients for more, I guess, kind of payments? Or how did that work through the pandemic? And is that sustainable at the current level?

No. I think it is sustainable because it's simply an overall process. Starting from the order intake, you agree or -- of milestones with your customers. You invoice. You collect the cash. And that's a continuous improvement. There are still areas where we can improve. And we discover some pockets of improvement every year. So I don't see why we should -- we could not maintain this high level of performance in every elements of the working capital.

The next question comes from the line of Charles Scotti from Kepler Cheuvreux.

I have a couple of questions from my side. The first one on your outlook. Can you confirm that the revenue guidance to get back to precrisis [ level ] in 2021 does not exclude M&A? Can you confirm that it's on an organic basis? Second question, on the profitability of the German and Central European business, which has declined 100 basis points despite flattish organic growth. Can you tell us the reason of this margin contraction? And do you think it is coming from a different mix of activities with T&D potentially dilutive on the profitability of the segment? My third question, on oil and gas. Obviously, the recovery of oil prices is a good news for your business. Can you give us an idea of the backlog at the moment? And should we expect a very steep recovery of the oil and gas business? And finally, last question, on the profitability -- mid-term profitability. It should be already amazing to see the profitability getting back to precrisis in 2021. But do you think the 6% profitability level is the new normal for SPIE going forward? Or do you see upside in the mid-term?

Thank you. So regarding the outlook, we do -- we have an element of M&A in our outlook. It is always difficult to ascertain precisely. So we make a cautious hypothesis in terms of contribution from M&A. So obviously, very far from the EUR 200 million, which is a full year number, very far from that. Regarding oil and gas backlog, we have a decent backlog in oil and gas. This year, we see some rundown in Middle East on some activities because the contracts are getting completed now. But we will work on replacing them. All together, we're looking at a fairly stable oil and gas, stable, slightly negative for this year. And then we'll see what is the impact of the current surge in oil prices. In Germany and Central Europe, the margin -- there's some element of margin contraction. Not at all because of T&D, which is a relative activity or at least for transmission and in the average margin are slightly better for distribution. But all together, this year, we have been impacted in terms of temporary unemployment measures in Germany and [indiscernible] We have customer like Lufthansa or the [indiscernible] This customer have been very impacted, just to give a few examples. And so we have, at some stage, 150, 200 people in [indiscernible] sometimes a bit more. So -- and it happens that this unemployment scheme in Germany, more onerous to the company than they are in France or in the U.K. So this is an element explaining the way of the margin this year and which will continue a little bit in 2021. So this is a bit a handicap to come back to the previous margin. However, as we see and we are targeting a margin in 2021 very close to '19 so very close to the 6% we achieved in '19, there will be definitely progress in France. There will be progress in Germany as well. And for the future, clearly, 6% is not a cap. 6% is a starting point. And we are clearly going to move our margins back up from 2022 onwards. That's clearly a goal, and we are very well set to achieve it.

The next question comes from the line of Ebrahim Homani from CIC.

I had 2 questions. The first is about acquisition. You mentioned EUR 200 million acquisition in 2021. What does it represent in term of revenue growth, if you have an idea? The second one is about your leverage. You partially answer to this question. You managed to reduce your leverage from 2.7 to 2.3x in 2020. What level of leverage do you target in 2021 and based on which free cash flow conversion ratio?

Regarding M&A, as I just said, we have made some assumption in our budget, but it is internal assumption and experience, so that it's very, very difficult to forecast accurately the timing of the acquisition. So I don't think it would make a lot of sense to give you a number, which for us is a very rough estimate anyway. A lot depends on the timing of the deals and especially when we are dealing with mittelstand companies in Germany, negotiation can get protracted and -- but sometimes, also, we have positive surprises. So I cannot be more accurate today. And then we will -- for leverage, I think Michel did answer the question, but he might repeat it.

Yes, so we decreased this leverage in 2020 from 2.7 to 2.4x, as you said with a outstanding cash conversion, 139%. It's clear that the underlying performance of 3 days was very good. But on top of that, we have benefited from these deferred payment schemes for social charges and taxes, as I mentioned. And so the deleveraging in 2020 was made despite the impact on the EBITDA, as I explained, in the second quarter. So it was really driven by the decrease of the debt. The further deleveraging in 2021 will not be to the same -- with the same root cause, if you allow me. It will not be thanks to a strong decrease of the debt because, as I said, we will repay this financial -- social charges and taxes. We will resume to pay dividend. And -- but we will still continue to deliver in terms of cash conversion and working capital management. So the decrease of the leverage will further the vehicle in 2021, will be done back on the increase on the EBITDA, on the ratio compared to 2020, as I explained.

Okay. And historically, maybe you can -- if you can give us a flavor, historically, when you made EUR 100 million acquisition, what did it represent in a proforma basis in term of revenue growth?

Sorry. Not sure we understood the question.

If you take EUR 100 million acquisition historically, what did it represent in term of revenue growth in a proforma basis if you have...

We -- I mentioned earlier in the presentation that average, in the previous year, the M&A has brought 3.5% top line growth. But obviously, it is much less in -- since we did much less acquisition in 2020, the contribution to the 2021 top line of the 2020 acquisition will be much less than usual. But historically, it has been 3.5%.

The next question comes from the line of James Winckler from Jefferies.

A lot of mine have been answered but just maybe 2 from me. One is, if you could comment on your views of pent-up demand and how you see that pent-up demand for your services, specifically in offices that have had to be closed or employees not going in for almost a full year now, how you see that sort of benefiting you through certainly H2 and reopening? And then 2, in terms of other sort of top line government initiatives, I've seen that Germany has said they're going to spend about EUR 500 million on upgrading ventilation systems. And the -- wondering if you're sort of well-placed to benefit specifically from that through this year as well.

Well, one thing which made us very resilient this year is that, in fact, in building maintenance, if I look at our building maintenance activity, in fact, we had a very decent year. I was really worried that the churn work would vanish, but it's not the case at all. And we had fairly stable activities in this regard in France and the Netherlands or in Belgium. And we had even a 3% growth in technical facilities management in Germany. So it has remained decent here. Why? Because even if the buildings are less occupied, which was most the case in France than in Germany, by the way, where you still have a number of maintenance to do and number of norms and regulation to stick to. So, so far, it has been fairly stable in this regard. And obviously, what does not happen too much is all the changes because people move and then it was our reorganization. And so we have to reorganize all the networks, et cetera. This has applied less. So arguably, yes, this is some pent-up demand for -- to come. On the other hand, we also were hampered in some areas, for instance, where the hospitals have been very busy. So we had to really ensure the operations of the hospital. So our people have been working. There was no way they could refrain -- they could not go to work. And they had to be there in the hospitals and doing all the maintenance and showing everything would work. And this is mission-critical again. But on the other side, also renovation and upgrades, et cetera, in this sector have been put on hold. So I think this could help in the future when things come back to normal. And then in terms of ventilation systems, be it in Germany or elsewhere, this is obviously an area where we're very strong. And clearly, in Germany, part of the stimulus plan is focusing on these services. And so I think we will be well-positioned to benefit from it.

The next question comes from the line of Nicolas Tabor from Stifel European Bank.

And congratulation on the results. The first question was on the U.K. I wanted to understand, after the soft restructuring, where profitability is lying? I mean I guess you can't give an exact number, but you have an idea. And how much do you expect it could further improve in the future? And overall, when we look at the Northwestern Europe, what are the moving parts for you to come back to maybe above 4% margin over the next 2 to 3 years, over the mid-term, let's say? Then the second question is on the nuclear activity. I guess you had put the phaseout of one of the contracts, and there's not much to catch up in terms of delayed activity. So is it fair to expect stable nuclear activity for 2021 versus last year? Or is there some new contracts kicking in that we -- I mean I'm not knowing of that you can share with us? And then the third question would be on the net working capital, not on the short term but really can you share with us the best-in-class level of days -- negative days of working capital so we can try to understand where is the level of days you try to achieve by improving the, let's say, underperforming businesses and subsidiaries and where you could be further down the road in several years?

Right. So regarding U.K., well, we have had a major reorganization this year following the sale of the mobile business -- mobile maintenance business. And clearly, now we -- so we have streamlined our overhead massively and also really worked on a lean and efficient organization, addressing the new conditions of the market. So it has been done fast and efficiently. And it did show results because we have a slightly positive margin on the second half of the year, and we had a very good cash generation over the year. So it's been satisfying progress made. And going forward, we're looking at an operation which is smaller, which is leaner. We do not have grand plans to grow the volume. But we are real adamant to further grow the margin in an environment which is not easy and not helped by the new situation created by the Brexit, obviously. But we're looking at something. Again, why I say that 6% is a starting point for the role of SPIE? I think in U.K., we're looking at something different to remain dilutive for quite a while. But looking at 3%, 4% margin in not too distant future will be probably a good place for U.K. For the whole of Northwestern Europe, it's different because, obviously, Netherlands have made tremendous progress in terms of margin this year and are planning to continue to improve. So definitely, the whole segment will move above 4% margin in the future, definitely. Regarding nuclear. Yes, it was hampered in 2020 because works for the Grand Carénage had to be postponed. It was too many people working in confined space, not advisable with the current sanitary situation. So the work which was to be done this year will be spread over the next years. It's not -- there's not that much flexibility because it is linked with the shutdown and the programmed shutdown of the various plants during summer. So it will be spread over the next year. And we're looking at, overall, fairly stable, give or take, activity for nuclear. As I mentioned often in the past, you never see too much variance because it is also linked to the bandwidth of the customer in terms of engineering, supervision, et cetera. But it will remain robust and at a very good margin and working capital level.

Concerning your question about working capital. It's -- this year, the improvement have been made everywhere. So I cannot tell you there is one best-in-class or the others are behind. It's clear that we have some organization and maybe more mature in the companies than others because of the history. But I think we really made strong progress everywhere, even in the mature organization, if I can say. So for instance, France made very good progress, Germany as well. And so it was everywhere. So I cannot tell you that there is one that should improve more than the other. I think that all of them, all geographies will continue to work on this. And the goal is to continue to improve year after year. So I don't know what is the objective. It's simply a day to day's work. And when the process are well in place, in principle, they are there to stay, and therefore, the performance is continuing. So this is what I can say about it. So sustainability of the performance is an objective there everywhere.

The next question comes from the line of Eric Lemarié from Bryan Garnier.

Yes. I've got 3, if I may. The first one, regarding M&A. I understand that your last acquisition [ Ernie grotesque? ] are very good exposure to renewables. Would you be keen to continue like that? I mean, would you be keen to continue to reinforce your exposure to renewables through M&A? And can you maybe share with us what is your exposure to renewables today? And by the way, still on M&A. Do you have any news on the assets energy plans to dispose from its division? It was my first question. Second question, a quick question on ESG and a question on governance. Would you consider maybe one day to split the Chairman and -- from the CEO position? So are you happy to continue like that? And last question, do you expect any impact of the current rising raw materials costs on your business?

Thank you. Regarding our -- yes, it is exposed to renewables. We are looking at targets in a different area, which are exposed to renewables. Very specifically, sometimes more broadly, yes? But I think when I look at our business today, the role of transmission and distribution services in Germany and in Netherlands are basically driven by the issue of renewables, yes? And the number of what -- quite a bit of what we do in France in terms of photovoltaic, of wind farm, et cetera, is clearly linked to renewables as well. And I'm not talking low carbon because you will remember that nuclear is low carbon, but I'm talking renewable. So yes, it is -- when you look at our transmission and distribution services today, very much is impacted by renewable. And there is an element of photovoltaic also in the building part, but this is probably a bit smaller. So it is something where the focus is high and the competencies are on a very good level. And it is part of our assessment of the targets. Now what sort of exposure do we have in this area? I'm not sure I understood properly the question about NG. But then regarding the last point, in terms of governance. I've been the CEO since, I don't know, it is my 19th year as a CEO and my 10th year or 11th year as Chairman and CEO. And in this sort of business where we have 45,000 employees, it's not a bad thing that people know clearly who is above. And when I look at what has happened at, for instance, you mentioned NG in the past, I'm not sure that for services activity, the split governance is the best idea. But I think everybody has a view on that. So far, I don't think that it is at SPIE an important issue.

Then on the rising raw material costs, any issues there?

Yes, it is -- well, we see some upward trends at the moment. But this is something we have experienced in the past. I remember yours was a pressure on copper price, for instance, was very significant. And when we talk electrical cables, the main impact is the price of copper and the price of oil because it is a mixture of copper and plastic. So we have seen that in the past. We have no qualms in passing the cost to the customers. A lot of our prices are indexed. And if they are not indexed, as you know, our portfolio is renewed fairly fast. So it has never been an issue. A few years ago, we have a question regarding our ability to cope with the wage inflation. I think also, we had the same answer, and we just pass it on to the customer fairly quickly, and it did so. So it is exactly the same for raw materials. It is -- the impact is very, very quickly passed on to the customers.

The next question comes from the line of Laurent Gelebart from Exane.

I have 2 questions this morning. So the first one relate to your financial charges. So what level of financial charges reduction could we expect as your term loan is subject to a margin grade, and you reach a cap threshold being below 2% -- 2.5x net debt-to-EBITDA? The second point is regarding your efforts on taxonomy. If I'm not wrong, taxonomy outperformance should benefit from cheaper financing costs. So do you expect at some point to refinance your bond -- target bond and to make large savings in terms of financial charging?

Thank you, Laurent. First of all, financial changes. You're right. The debt, and I think we have shown it in the slide. So we have -- we are below the 2.5 threshold. So now we can benefit from the lower cost for the term loan, so down from 155% to 1.4%. So it means on the full year basis, EUR 900 million -- or sorry, $900,000, so less than EUR 1 million. But for 2021, it will start now because I've sent the document to the banks today -- so at a publication. So it will come for 10 months, if you understand me. Now and also on the FCF, we have an impact as well. So when we use the FCF, because today, it's not wrong, when you use FCF, we will also benefit from a lower cost, down from 1.15% to 1%. Now taxonomy performance should believe from cheaper interest, maybe. So far, we know that they are -- there is a green finance emerging and opportunities can be taken. We are well aware of that. So far, as you know, we don't have any repayment of any of our debt components before 2023. So we have still time ahead of us. But it's true that SPIE would be well positioned to benefit for these new opportunities, mined opportunities. Yes.

There are currently no further questions coming from the audio line. [Operator Instructions] We do have a question from the webcast, and it comes from [ Samuel Job ]. Hello. Can you please explain what happened to France organic sales growth? Actually, steeper declines in Q4, what are the causes or concerns in 2021? Also, is the pricing environment a competitive environment? Lastly, more fees or less fees now across the business units?

Well, in France, we were not back to normal. And as you know, there was some new -- there was a second wave and then new lockdown measures in -- back in October, November last year. So it did have some element of impact a bit of the top line, but nothing major. But all together, we -- the whole year has been under pressure in France, including Q4. Regarding the competitive environment, nothing special to say. Just so far, people have reacted with the cooler head. And obviously, the building installation is sometimes more prone to price pressure, but we're not seeing anything major at the moment. And then maybe one element, now that NG has announced the sales of their services division, so-called Project Bright. We do hope that it will have a positive impact in terms of price discipline and then so positive impact overall for our industry. So I think that with this, we'll complete our call this morning. We thank you a lot for your attention. We had a -- we've gone through a very challenging year, but I think our people worked hard and delivered well. And it makes me very confident for the future. Thank you a lot, and have a good day.

Thank you.

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