SPIE SA (SPIE) Earnings Call Transcript & Summary

Hello, and welcome to the SPIE Half Year 2021 Call. My name is Josh, and I will be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Gauthier Louette, to begin today's conference. Thank you.

Good morning, ladies and gentlemen, and thank you for attending SPIE's conference call. We did deliver strong results for the 2021 first half of the year. Both revenue and EBITA are already back above precrisis levels. I'm particularly pleased with the fast recovery of our margin and with our excellent working capital performance, which led to an acceleration of our deleveraging. During this semester, our bolt-on M&A activity was also very dynamic and focused on our strategic priorities. So this strong first half of the year led us to upgrade our full year guidance. But first, I would like to share with you some good examples of our expertise, in particular, to help our clients reducing their energy consumption. On Slide 3, in the U.K., we have improved energy efficiency of a ventilation station, supplying the Kingsway Road tunnel under the Mersey River. We have supplied and installed high-voltage switchgear, low-loss transformers and control cabling. These new systems will save about 440 tons of CO2 over the last time compared to the old ones. They will cut cost by more than GBP 10,000 per year. This contract demonstrates yet again that when our customers look for energy efficiencies, we are part of the solution. On Slide 4, in the steel industry, our EMPERE solution allows our customers to significantly reduce the energy consumption of arc furnaces used to recycle scrap metal. This solution can cut CO2 emission of electric furnace by 1,800 tons per year. This is the equivalent of 900 cars traveling 20,000 kilometers. And since 2016, 1 million tons of CO2 emissions have been avoided by our industrial customers who use the EMPERE solution. On Slide 5, since the pandemic started, we have been very active to supply the health care sector with appropriate solutions. Here, we installed IT infrastructure and communication systems for COVID-19 vaccination centers in Osnabrück in Germany. This infrastructure was implemented within a very short time, the first system being ready for operation within 2 weeks of the first inquiry. Fighting the pandemic, as we all know, is a race against time, and we are proud to take part. And then on Slide 6, every year, our CSR policies are rated by EcoVadis. In 2020, we were awarded gold for the seventh year in a row. In particular, EcoVadis commended SPIE's increased focus on sustainable development, dialogue with stakeholders and implementation of new policies and initiatives aimed at managing CSR risks. Now moving to the highlights of H1. So we are pleased to report strong H1 2021 results with revenue and EBITA above precrisis levels, dynamic bolt-on M&A focused on the group's strategic priorities, excellent working capital performance, driving acceleration in deleveraging. And with such a good start, we are confident for the balance of the year, and we upgrade our full year guidance. So our H1 organic growth was plus 9.7% compared to H1 2020, and we were back to the high activity levels recorded in H1 2019. Total revenue growth was at plus 9.1% and a plus 1.7% compared to H1 2019. Our H1 EBITA margin was 4.8%, up 170 basis points compared to H1 2020 and back to the pre-COVID level of H1 2019. Our leverage ratio, which is, as usual, higher in June than in December due to our seasonality, decreased markedly to 3x at June 2021 compared to 3.6x at June 2020. On Slide 10, in terms of organic growth, Q2 2021 showed a strong rebound at 19.1% organic, confirming a firm business recovery following the significant impact of the sanitary crisis last year. This does reflect the strong resilience of our business, which is increasingly driven by 2 powerful trends: the energy transition and the digital transformation. Slide 11. Looking at revenue growth by segment. France enjoyed a strong rebound, up 21.1% organically compared to a low base in H1 2020 when the first lockdown had been particularly strict. Germany and Central Europe showed elevated strong growth against a remarkably resilient H1 2020. Organic growth was at plus 5.6%, of which 6.5% in Germany alone. Let us keep in mind that the organic decrease in H1 2020 in Germany had been very limited to only minus 0.3%. So it's an excellent performance in Germany. North-Western Europe was back to organic growth at plus 2%, and Oil & Gas and Nuclear was only slightly down by 1.4% negative. On Slide 12, we compare our revenue with H1 2019. So compared to H1 2019, our revenue was up 2.1% overall and stable organically, which means that we are back to the high level of activity recorded in H1 2019. Germany and Central Europe is up 4.5% organically. It shows the strength of our positioning, in particular, within the Transmission & Distribution segment. France is slightly up organically compared to a very dynamic H1 2019. This does show fast and sustainable return through high activity levels. North-Western Europe is 4.4% below H1 2019 where we had high comparison basis in both the Netherlands and Belgium. Oil & Gas and Nuclear, down 10% organically. As you know, the crisis in the oil and gas sector has been severe, but we're seeing our business starting to recover. Bolt-on M&A, part and parcel of our model. In 2020, M&A activity was interrupted by the sanitary crisis. It did resume in the second half of 2020, and we have been very active since the beginning of 2021. So we made 6 acquisitions totaling EUR 192 million of full year revenue, and we now target to acquire revenue well in excess of EUR 200 million over the full year. Our acquisitions are focused on our strategic priorities. Energotest in Poland, EUR 12 million of revenue in automation systems for power and industrial plants. Wirliebenkabel. So literally, we love cable in Germany with EUR 25 million of revenue in telecom networks. And KEM in Austria with EUR 30 million of revenue in telecom networks as well and both these activities are exposed to FTTX and FTTH activity. Wiegel in Germany, EUR 50 million of revenue in HVAC services. Valorel in France, EUR 5 million of revenue in industrial piping, especially in the pharmaceutical sector. And lastly, very recently, Infidis in France with EUR 70 million of revenue in data center infrastructure. So quite a busy start of the year, but this is not the end. And now moving to our activity by segment. So in France, a sharp rebound in revenue and EBITA on a low H1 2020 impacted by strict lockdown, which was, in fact, the stricter lockdown we had to endure. EBITA margin was up 290 basis points compared to H1 2020. So we see good momentum in Tech FM. We see a continuing high demand for telecom network services and now the 5G revenue has started to ramp up. Business levels in commercial installations were healthy. Industrial Services are still lagging a bit as the market has not yet fully recovered, but we tend to see some improvement on this side as well. I mentioned the recent acquisition of Infidis, which makes us one of the French leaders in data center, hyperconvergence services. And lastly, with regard to margin, EBITA margin is expected almost back to pre-COVID level in H2. Germany and Central Europe. The strong growth did remain unabated in Germany and in Central Europe, as we saw Germany delivered a very strong performance across the board. Transmission & Distribution services were fueled by energy transmission investment in the electrical grid. Tech FM and building technology and automation were also well oriented. And the German EBITA margin was close to H1 2019 level. In Central Europe, we saw a moderate revenue contraction in Hungary, mainly due to contract phasing, while revenue growth was strong in Switzerland. In North-Western Europe, we have very good news regarding the continuing margin expansion on the back of the successful organization and performance initiatives of the previous year. EBITA margin was up 230 basis points compared to H1 2020, and 170 basis points compared to H1 2019. In the Netherlands, revenue caught up in Q2 after a slow start. We see good trends in energy and water infrastructure and smart city services, while the demand from industrial customers and primarily petrochemical did remain low. EBITA margin made significant progress. In the United Kingdom, revenue grew strongly against H1 2020. While some customers are still a bit slow to make decisions, both EBITA margin and working capital improved, which is very satisfying on the back of all the efforts performed last year. Belgium rebounded, but revenue settled below H1 2019 level as the building sector remain affected, while energy and transport infrastructure were very active. And to Oil & Gas and Nuclear, we also did see a rebound in Nuclear and we see positive signs in Oil & Gas, where we expect growth to return in H2. Altogether, EBITA margin improved by 90 basis points compared to H1 2020. The Oil & Gas Services revenue was down against a resilient H1 2020. Business levels improved in Africa, but were offset by a number of contracts ending in the Middle East. The good news is that growth is expected to return in H2, while EBITA margin, as you see, will remain high, benefiting from the reorganization conducted last year. In nuclear services, revenue rebounded on the low H1 2020, which, as you will remember, had been impacted very early by COVID-19 restriction. The Flamanville EPR contract continues to ramp down, and margins remained very high. So together at group level, our EBITA margin was back in line with H1 2019 level, and we see 3 good news on this chart. First, the strong pickup of margin in North-Western Europe. All our organization efforts and performance initiatives are paying off. Second, the high level of margin maintained in Oil & Gas and Nuclear. And third, the potential for group margin to exceed 2019 level and to be above 6% as soon as 2022, when France and Germany and Central Europe will be back to pre-COVID levels. Now I hand over to Michel who will comment on our financial performance.

Thank you, Gauthier, and good morning, everyone. I am on Slide 20. As Gauthier has already mentioned, we achieved in H1 a strong rebound in all of our key figures, which are all at or above the H1 2019 level that you can see on the right column of this chart. Compared to H1 2020, group revenue was up by 9.1% at EUR 3.3 billion. EBITA was up by 71% at EUR 160 million. EBITA margin was at 4.8%, up 170 basis points compared to H1 2020. Adjusted net income more than doubled to EUR 82 million, and net income rebounded sharply at EUR 57 million while we had a loss last year. I will comment in detail the P&L in a minute, starting with the revenue. Gauthier has already detailed the top line by region, but let's see the bridge summary now. Our 9.1% revenue increase takes into account a 9.6% increase at constant ForEx and a negative ForEx impact, minus 0.5%. We have already commented the 9.7% organic growth. Growth from acquisition is limited to 0.3% due to the phasing of our acquisition all over the semester. It will mechanically be much more significant in H2. And I remind you that the negative scope effect is due to the disposal of the U.K. mobile maintenance activities made last year in March. On next slide, you can see that our adjusted net income reported strongly, resulting primarily from the sharp increase in EBITA. In addition, our net interest charges were slightly reduced due to our lower level of net debt and our lower leverage. Our financial charges were negatively impacted by negative ForEx, while it was positive last year. And our adjusted tax rate was almost stable at 32%. On Slide 23, you can see that the reported net income rebounded sharply to EUR 57 million. Amortization of goodwill was stable. Restructuring costs were close to 0. Other nonrecurring items were minimal as well, while last year, they reflected the accounting loss linked to the disposal of our mobile maintenance business in the U.K. Let's move now to the cash elements. The very good news I could even say as usual is the underlying improvement of our working capital at the end of June. Our working capital, which is structurally negative, improved by 7 days on an underlying basis. It represented minus 22 days of revenue at the end of June, while it was minus 15 days at the end of June 2020 excluding the impact of social charges and taxes deferral schemes related to the COVID-19, which have been paid back at the end of June 2021. On this chart, the gray area, the bars represent the impact of the COVID-related delayed payments. And this chart reminds you that it was only minus 3 days at the end of June 2018, which shows the magnitude of the progress we have made since then. The continued improvement in working capital is a result of a very strict cash management, which primarily translates into an excellent level of cash collection across the group. As you can see on this chart, the 7 days improvement result from a 2 days improvement on trade receivables, 4 days improvement in trade payables, 1 day improvement in accrued income net of deferred revenue and advance received. So overall, 7 days at minus 22 days compared to minus 15 days at June last year. Due to our usual seasonality pattern, our free cash flow is negative in H1 by EUR 338 million. But despite the payback of the social charges and taxes deferral, it is better by more than EUR 40 million compared with H1 2019, thanks to this very strong working capital performance. Compared to H1 2020, this year, we have resumed M&A activity, as Gauthier explained, and we have spent so far EUR 48 million, and dividend payment as well for EUR 70 million. Compared to end of June 2020, our net debt decreased by EUR 83 million. Our leverage ratio was at 3 at end of June '21, showing an accelerated deleveraging compared to end of June 2020 level at 3.6. This makes us very confident to reach 2.0 at the end of this year, which compares to 2.4 at end of December 2020. Our credit rating from S&P is unchanged at BB. And we have now a BB rating from Fitch. We are not rated by Moody's anymore. You will note that the leverage, including IFRS 16, is about the same, slightly lower at 2.9 in this chart. It's not in this chart, but in terms of debt maturity, there is no change. No debt maturity before June 2023. So nothing new here. And now I would like to stress this deleveraging over a long period because this chart shows the seasonality pattern of our leverage, but it's interesting to note that with the delta of 0.6 increase in H1 2021, we are back to pre-SAG acquisition pattern. If you remember, the SAG acquisition made in 2017, and this increased the seasonality of our working capital as T&D activities are more exposed to weather conditions. Since then, we have improved the working capital of these activities with improvement in processes and cash collection. But we have also improved working capital in other geographies like the Netherlands and the U.K., for instance. This concludes my part, and I will now hand back to Gauthier.

Well, thank you, Michel. Since the beginning of the year, we have experienced very healthy business trends in most of our activities and geographies. The rebound in the group's EBITA margin has been faster than anticipated and we are firmly lastingly driven by the energy transition and the digital transformation. On the wake of our strong H1 results, we upgraded our full year outlook for 2021, and we now expect group revenue at or above 2019 level. EBITA margin at 2019 level of 6%, full year revenue to be acquired through bolt-on acquisitions were in excess of EUR 200 million, and a strong reduction in the group's leverage now expected at around 2 at year-end. The proposed dividend payout ratio will remain at about 40% of adjusted net income attributable to the group. We will pay an interim cash dividend of EUR 0.13 per share, which is 30% of the approved dividend for 2020 on 27th September 2021. And before we turn to Q&A, let me invite you to join us for our Investor Day that will take place on September 20. This event will be an opportunity for us to give you insight on SPIE's commitment to sustainability and to show that when it comes down to climate change, we are clearly on the side of the solution. This concludes our presentation, and we are now ready to take your questions.

[Operator Instructions] And our first question comes from the line of Ebrahim Homani from CIC.

I have two questions, if I may. The first one is about your margin in France. How do you expect that the margin is below its 2019 level despite revenues 2% higher? And the second one is about your guidance of EBITA margin. Based on your guidance, an EBITA margin of 6% in 2021. Should we expect the margin higher than 7% in the H2 and which segment will see positive developed margin?

Well, regarding the margin in France, as we explained in the past, life is not fully back to normal and especially in terms of productivity and how we have to deal with the sanitary situation on our jobs. So we have a number of constraints [ there ]. Sometimes work having to be interrupted because of suspected cases, quarantine, et cetera. So this is one element. And the other one is, as we said, we have 20 bps -- basis point impact from the rollout of our ERP system. We expect the gap to diminish in H2, also thanks to underlying improvement. And as we said, we expect the margin next year to be back to pre-COVID level. Regarding margin H2, yes, you are right. It will be around 7%. That's the plan, which I explained. The diminishing in the gap, we are announcing for H2 in France.

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

So one question. So firstly, on the leverage. So clearly, at year-end because you said that you're going to be at 2x net debt to EBITA. So presumably, in 2022, you're going to be well below the 2x. So how should we think about capital allocation beyond 2021? And secondly, now with the option for the facility management business of ENGIE that has started, is there an update that you can give? So I assume that now you have a little bit more visibility on the perimeter and very high level if this would make strategic sense for SPIE. And how you're offering a positioning compared to ENGIE and if there would potentially be any antitrust issue in France? And also lastly, if you could please comment if you have started seeing an improvement in the commercial activity across your regions related to the green investments?

Maybe I can start with the first question on the leverage. So the -- so as a reminder, the leverage at 2.0 at year-end will be with -- thanks to a strong improvement in EBITDA clearly. And since we have resumed -- we have resumed dividend payments, M&A activity, and we would have repaid the full social charges and taxes delayed from last year. I think it's already a good performance. Also the debt could be probably stable. We will see, but at least the leverage will be there. Now moving forward, I think the capital allocation will not change. So we have always clearly stated that our strategy is to use our cash flow into 3 different types of capital allocation. First of all, deleveraging is one element. So let's say that we always say that 1/3 of our cash should be allocated to the deleveraging, 1/3 to the bolt-on acquisition and we'll continue. And I think in the first half year this year has demonstrated this, our ability to execute fast. And of course, the dividend payment, that will remain 40% of payout. So no change planned on the capital allocation strategy.

Yes. And regarding ENGIE, sales of [indiscernible], so the project called Bright. First of all, I would like to remind that SPIE's plan on a stand-alone basis is a very strong and robust plan and was -- the independent European leader with a clear way forward. So really, it's a good plan, and we are not desperate to make any acquisition of any sort. However, the Bright topic is an important event on the market, and it is our duty to look carefully at it. So that's what we are doing right now. It would only make sense if it was a safe way to significantly accelerate our value creation. So this is what we are studying at the moment, and it's really very early and too early to draw any conclusions. And so I think we'll need more time before we form an opinion.

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

Yes. I got three, if I may. The first one on your new guidance regarding acquisition. So you mentioned acquisition -- bolt-on acquisition went in excess of EUR 200 million of revenues. Should we expect SPIE to continue in the same region of the first semester in the second semester? So basically, do you think you could reach a contribution in terms of similar revenues around EUR 400 million this year from bolt-ons? This is my first question. My second question regards your last acquisition, so Infidis. If I'm not wrong, you mentioned in your press release and in this presentation EUR 70 million of renewals generated with only 63 people. If I'm not wrong, it's more than EUR 1 million of revenue per people. It looks very high compared to your previous bolt-on deals. Is there any reason for that? And should we expect Infidis to generate much stronger EBITDA margin than the regular bolt-ons you make? And the last question on this ENGIE and Bright deal. Do you expect -- do you expect that once the deal will be done -- and do you expect the competition level in the marketing trends to ease a bit, to be less tense?

Yes. So regarding M&A, you see we have a good pipeline, but it's unlikely that we will be doing as much in H2 as we did in H1. So there will be more acquisition in H2, clearly, but we're not advertising a EUR 400 million for the year. Regarding Infidis, yes, these are very, very specialized services in the area of data centers. It's services we are familiar with, because we have already -- we acquired a company in this sector a number of years ago, which is [ eScloud ], which has been performing very well. And yes, we have 63 talent people and then there is obviously some contribution of subcontractors and of -- and the services are, as I said, very specialized. So it's a higher level of turnover, perhaps higher than what we are used to, but similar with what we saw in the previous acquisition with [ eScloud ]. And the level of margin is very good here, absolutely. And then regarding Bright. Absolutely, this is a very important element. Whomever is the winner of this auction, we clearly see that there is room for improvement on the margin level. We have mentioned in the past that this player tended to be disruptive on pricing. So we expect benefit from the whole industry of change of shareholders. Sorry, I realize that I failed to answer the last question of the previous question, which is the green deal. It's a bit early in terms of translation into production. What we see is there's more centering activity in this regard stemming from various players, including public authorities both at national and local or regional level and also various other customers. We have given examples today are also stemming from the industry. Clearly, there's concern about decarbonization of the economy is spreading everywhere and spreading faster. So a lot of tendering activity in this regard is taking place right now.

Our next question comes from the line of Nicolas Tabor from Stifel.

The first question would be to understand the trends in the revenue and organic growth. So looking back at the Q1 slide show, so it seems that your overall group organic growth decelerated compared to 2019, right? And I know there's many moving parts, but I wanted to understand if there's something to flag at the group level other than maybe more restriction from COVID? And maybe what would be the exit rate at the end of the quarter? And as you said, at or above revenue for the full year and you're already above in H1. Is there any particular headwind we have to think about other than COVID, obviously, which is difficult to predict? But is there something like contract phaseout or any pressure that you want to mention? And then apart from the revenues, on taxes paid, it was much lower despite higher profits. So what to expect in H2. So more technical question. And then on the net working capital, congratulations on the strong improvement. And is there any reason those 7 days should reverse in H2? And does a lower outflow in H1 means a lower reversal in H2? How should we think of that evolution sequentially?

Well, we are not worried about the trend and you may see some little variation in terms of organic growth from 1 quarter to the other. [indiscernible] a lot of significance in our [ type of ] activity. I think what's important is that the trends are supportive, and we're looking at [indiscernible] H2, sorry. So no particular worry at all in this regard. And yes, we have a bit of contract phasing or [ another thing ], but altogether, we will not see -- I mean, a very different H2 and the trend are supportive. And so we're fairly confident in this regard.

Yes. Concerning your second question about the taxes, if I understand well, your question is about the tax being paid in H1. So yes, they are lower than last year, but we have to keep in mind that usually you pay your tax on the prior year results. So it's logical that they are lower this year. And if you now think about the P&L, they will be higher with a higher taxable income, clearly. So I think we can -- when we -- it was difficult to plan the tax at midyear in terms of P&L because it's assessed on a full year basis. But we try to show a tax rate that is the one that we could expect at year-end. And based on our estimation today, the adjusted tax rate should be around 32%. And -- but the tax rate that you will see on the P&L could be higher because the U.S., sometimes a movement on the deferred tax elements, which is a bit complex and technical, but we already know that, for instance, the deferred tax liabilities in the U.K. will increase, and it will have a negative impact on the P&L simply because the tax rate in the U.K. will increase from 19% to 25%, for instance. So I won't go too much technical details, but let's say that if you keep in mind that in the P&L, it will be around 32%. And in terms of cash, yes, it would be slightly lower than last year on the full year basis. And then your third question about working capital. So yes, it's clear that you have this seasonality. So you will have a reversal of the working capital in the second half, clearly. So this is how we will reach the 2.0 level in terms of leverage. So if we discard the repayment of the social charge and taxes that we have explained, I think the overall performance should be quite positive and above the 100% cash conversion we are used to target in the operations every year. Did I answer your question?

Yes. And can you just -- do you have the information on the exit rate that you can share with us for the end of Q2 to have an idea of when we exited sanitary restrictions, how the business was coming back?

It's not meaningful. It's too small for a period of time. Again, as organic growth on the quarter has, in my view, limited meaning and [indiscernible] shorter period. Generally, the COVID -- I mentioned a bit of disruption due to COVID in terms of organizational sites and that sort of thing. But generally, the impact is limited. And in terms of decision-making of our customers, well, it might have a bit of impact. But in terms of production flow, we were able more or less to produce everything that is there in the order book at a normal rate. So it's -- we have readapted to the situation and stay for a few events here or there. We're back to normal. We have a very, very few people now on temporary unemployment. We have a few sites that are still closed and are like a trade fair in Germany or a few sites where there is less activity like Operas or theaters. We'll do maintenance and some work for preparing for the event. But this is at the group level, this is very limited.

Our next question comes from the line of Peter Testa from One Investments.

I've got 3 questions, please. I'd go one at a time. If you look at your comments you made about ENGIE and Bright, you made a point that only if it were a safe way to significantly increase value creation. Maybe if you could just give us a reminder of how you view hurdle rate on M&A and how you take account of the difference between a large transaction and a small deal given different risk criteria and thinking about that and also the different implications of the capital structure. Just give some reminder of how you regard the value creation from M&A.

Well, obviously, on the -- talking Bright, it's very much larger deals than usual. But if I look at one of large deal, which was SAG, transmission and distribution activities in Germany, we have seen clearly an improvement of the margin. We have seen a very significant improvement of the working capital, and we did materialize the synergies that we had advertised at the time of acquisition and in terms of integration, making the cultures match, et cetera. I think we have made excellent progress in a limited number of years. Looking at an M&A deal, you have to look at the integration aspects, the synergies, the reaction of the customers, and obviously, you have to also look -- and show that your balance sheet and your leverage remains very reasonable. So that these are the typical features that you need to take into account, whatever the deal is.

Okay. Is there a different view on return requirement, given scale and risk and maybe also the fact that one could be funded by cash and the other may not entirely?

Well, no, it's -- I mean, really -- it has to be a good deal. It has to make sense in terms of value creation, whatever the size and the type of the deal.

Okay. Then the second question, please. If you look at recruitment, can you give a sense on how recruitment is stepping up in your major zones in Q2 or maybe expectation in H2 in recruitment and the extent at which -- if you are indeed stepping up recruitment and whether there's any impact to this on margins from either having more people come in and need training or reengaging with subcontractor networks, which [indiscernible] back to growth may also have a margin impact, but will be repaid with growth as the resources grow.

Well, it doesn't have an impact on margin, and we're in a constant flow of training and recruitment and apprentices different trainings for different technologies and then recruiting people. We recruit at group level 3,000, 4,000 people a year, depending on the state of the activity. And so it is completely built in, in our cost base. And so there's no impact on margin. It's totally built in.

Okay. Can you give us a sense on how recruitment itself has stepped up in Q2 and what do you think in H2 in your major regions?

Well, it's -- So obviously, we were recruiting every year everywhere and [indiscernible] and even last year, we never stopped recruiting. We still recruited close to 3,000 people overall in the group. As you remember, last year, we had still growth especially in Germany in H2, and we had to deal with it. And but also even in France, some technologies evolve, customer base evolves and you have to address that and keep recruiting. So it's -- we do not see a major step up right now. It's upward trend since H2 last year. And in fact, since the previous year, it has only been slowed down in H1 last year. But apart from that, it's an upward trends all the time. And then recruitment is one thing, but you also have to work on talent retention. And I think the loyalty of our employees is strong. Resignation rate remains low. And we see schemes like employee shareholder schemes, they are also designed to enhance the loyalty of our employees.

Yes. Okay. And then the third question, please, is if you could give some sort of sense on the commercial side of activity. There's obviously a lag between projects being announced one and launched and COVID coming after COVID can create some time aspects of that. So I was wondering if you could give some sort of sense on what you see in terms of pipeline or maybe more specifically, book-to-bill Q2 versus Q1 or something like that, please?

Well, book-to-bill is increasing. Clearly, we have -- we have a good order book. So our backlog is increasing, backlog for this year and backlog for the years to come. So it's a very positive trend everywhere, everywhere.

[Operator Instructions] Our next question comes from the line of Charles Scotti from Kepler.

Yes. I have 3 questions, if I may. The first one, on Oil & Gas, the business seems be lagging the rest of the group's activities. What are the outlook for Oil & Gas in H2 and 2022? My second question on North-Western Europe. Do you see room to further improve the profitability in this region and potentially close the gap with the rest of the group? Or do you think that the profitability is structurally lower? And finally, on your shareholding structure, I can see that CDPQ is no longer in the share capital pie chart. Can you confirm that they sold out their entire stake in the company?

Yes. So regarding Oil & Gas, we have been affected by the crisis, both directly in terms of dealing with the sanitary situation and indirectly because the oil prices have been low for quite a while. Now it's improving now. And then the second element is more internal. We had a number of contracts in the Middle East assistance to commissioning, but at some stage, commissioning is meant to be complete. And obviously, and this contract has not been replaced so far. We look at a better H2. And we think we would have high single to double-digit growth in H2. And we think that the oil price has moved up, and so the situation tends to normalize in Oil & Gas. So we're looking at probably at next year with more optimism. Regarding North-Western Europe, there is room for further improvement in margin definitely. And I'm really pleased with the improvement we have shown already. U.K. is on a decent trend. Obviously, U.K. will remain dilutive at the group level. I'm not advertising anything different, but we have seen a significant improvement and also in terms of cash generation. So this is very satisfying. Netherlands are doing well. And I think the Netherlands will be the first to reach the group's average, so the 6%, and they're not far from that this year. And then Belgium is also progressing above -- close to 5%. So it's, at some stage, definitely apart from U.K., I expect these countries to be at or close to group's average. And then regarding your second question. So CDPQ, CDPQ is no longer a shareholder. They have exited completely in the recent months as part of the strategy to move to private equity as opposed to the minority shareholders on public companies.

[Operator Instructions] We do have another question from Eric Lemarié from Bryan Garnier.

Yes. Just a quick follow-up for me. Could you remind us what is the maximum leverage for SPIE in case of a large acquisition? To what level are you ready to go?

Well, you know, we would like first -- in any case, our goal is always too deliberate, like [indiscernible]. But in case of a bigger acquisition, all will be to remain with a BB rating. So it means that we should not exceed 3% or 3.5%, I think it should be the max to stay with this rating because I think it's important.

Okay. Thank you very much. So we don't have any further questions in the queue. [Operator Instructions]

Sorry, we have a question from the webcast coming from Christophe Chaput. The first one is, since the acquisition of SAG, can you give us an idea of the improvement in working capital that you have benefited from?

We have to check. But in a nutshell, we are now in a position while the whole of the German and Central European business is in negative working capital all year through. And at the time of acquisition of SAG, we had -- due to the way SAG was dealing with our customers and payments, et cetera, we had quite -- I mean, we were in positive negative. In positive working capital territory almost all year through with SAG. So it's a significant improvement. And the cash conversion rate of Germany has been constantly above 110%, 120% over the past 6 years.

And the last one from the webcast. Regarding the tender offer on the green deal project, would you say that the pricing is rational and thus the margin should be the average?

Yes, yes. I think we -- at the moment, we have not too many complaints about pricing discipline in our industry. And so there is no reason to share on the contrary that margin would be affected because of this green deal projects. On the contrary, there's a lot of expectations from our customers in this regard in terms of what we can offer, how we can help them, and the competencies are valued. And so we do not expect any sort of price pressure from this direction, clearly. And generally, we mentioned that we expect 2022 to be above 19% in terms of margin. And so we expect to be above 6.5% in 2022. And we expect this trend to continue through the years after. And so my midterm goal is to reach 6.5% at group level and not too far from now. So really, the pricing environment is decent, and we are working hard on the underlying improvement as well. And so I'm really confident about the margin trend.

[Operator Instructions] So we have no further questions in the queue. I'll hand you back over to your hosts.

Well, thanks a lot for attending this conference today. And I think we're on a good path. As I keep telling, it's a good time to be an electrical engineer. And I think that our H1 results do evidence this statement. So thanks a lot for attending this session. Have a nice summer and talk to you in October. Have a good day. Bye-bye.

Thank you. Bye.

Thank you very much for joining today's call. You may now disconnect your handsets. Hosts, please stay on the line. Thank you.