SPIE SA (SPIE) Earnings Call Transcript & Summary

Hello, and welcome to the SPIE Full Year Results 2021. My name is Courtney, and I'll be your coordinator for today's event. Please note that this call is being recorded. [Operator Instructions] And I will now hand you over to your host, Gauthier Louette, Chairman and CEO, to begin today's conference. Thank you.

Yes. Good morning, ladies and gentlemen, and thank you for attending SPIE's Financial year '21 Conference Call. Before starting my presentation, I want to warmly thank Michel for his contribution over the past years in strengthening our financial structure and improving further the quality of our financial communication. Jerome Vanhove will be our new CFO. He has been with us nearly 15 years in charge of strategy and M&A, and he knows our group and our business intimately. I'm also very pleased to welcome our new IR Manager, Audrey Bourgeois, who brings the strength of experience to the group. As usual, I will now start with a few examples of what we have done for our customers in 2021. On Slide 3, in Belgium, SPIE is taking part in the installation of the largest battery farm ever connected to the high voltage grid. The site is a former coal power plant and the project is to build 100-megawatt hours battery-based energy storage. We are in charge of cabling, transformers, switchgear infrastructure, video surveillance and lighting, as we further build our renewable energy capacity, grid face new challenges in terms of regulating the power outcome and SPIE can address these challenges, thanks to cutting edge solutions. Another example on Slide 4. This is one about energy efficiency for Bordeaux Métropole. It is a long-lasting customer and we recently had to expand further our relationship with this customer. We signed a 6-year contract, covering the operation of energy facilities at 110 schools and day care centers and at 36 cultural facilities. Our mission covers monitoring and maintaining, heating, air-conditioning, hot water production and ventilation equipment. And you will see this work is key in achieving energy efficiency. Our work contributes to save 12% of emitted gas per year for the period 2015-2021. On Slide 5, we're moving to Eemshaven in the north of the Netherlands. It is host of a strategic energy hub, 380-kilowatt compensation and filter station run by TenneT. Solar power station, wind and solar parks and the Gemini offshore wind park are connected to the station. In addition, Norway has a NorNed cable, as well as Denmark are connected to this station. Studies show that without mitigating measures, a too high harmonic distortion could occur. So we are to design and work on harmonic filter to [ circumvent ] the voltage quality and its distribution. It does take a lot of know-how to deal with this intricate high-voltage issue. And then on Slide 6. In Germany, we completed the full-scale implementation of a new data center in the city of Frankfurt for a major operator with Interxion. And Interxion has been a long-lasting customer for us for the past 19 years through 8 successful projects. We had to draw upon our expertise as a comprehensive service provider, because this data center also included a 110 kV substation, which has been done by the teams of SPIE SAG. On Slide 7, an example regarding e-mobility, and this is in Paris. We are deploying 340 electric vehicle charging points in Paris, and it has to be completed by 2023. So the customer is Total Energies, and this network is now called Bélib. So we have to remove and recycle 343 stations. It is the old Autolib network for the people familiar with the Paris network. And we will connect 1,844 new so-called bollards, which are smart, which are connected and intelligent. And we have to assist with the commissioning. So really, a large project one of the first awarded under the stimulus plan to lead Europe through the energy transition, and we're looking at many more to come. And finally, in France, SPIE ICS gains the label Institut Numerique Responsable’s, which recognized digital responsibility, and we are one of the first digital services company to be granted this certification, again, highlighting our very committed approach to digital comes -- technologies that are inclusive, ethical and considerate of the environment. All these examples are good illustration of how SPIE is part of the solution when it comes to energy transition and digital performance. Now, moving to our financial highlights for the year. So 2021 is a strong delivery of the SPIE model. Indeed, we do show a strong rebound, leading to revenue in line with 2019 and an EBITA margin higher than the pre-COVID level. It is another year of outstanding cash generation. Our leverage ratio is at all-time low. We'll start a very good year in terms of bolt-on M&A, with 8 acquisitions and on top of that, came Worksphere. Now, we'll see our focus on sustainability remain unabated. Overall, in 2021, we demonstrated once again our strong fundamentals. So looking at the figures. Again, we saw sweet results in best-in-class cash generation and once again, we did deliver on our guidance. 2021 organic revenue growth was up plus 3.2% compared to 2020. Total revenue growth, 4.9%. And as expected, our revenue is back in line with 2019. Our EBITA margin was 6.1%, up 100 basis points compared to 2020 and up 10 points compared to pre-COVID level of 2019. Net income up 38%, a sharp rebound, to EUR 243 million. We intensified the M&A activity. It does enrich our skills. It further enhance our growth profile and it accelerates value creation. So EUR 277 million across the 8 bolt-on acquisitions and more than EUR 400 million revenue with the strategic acquisition of Worksphere in the Netherlands. We generated EUR 268 million of free cash flow, and our leverage is at all-time low of 1.8x at the end of 2021. We will propose a dividend of EUR 0.60 per share at our next AGM, and this is up 36% compared to 2020. So looking at Slide 12. Altogether, in 2021, our revenue grew 5% at constant ForEx. We had a strong rebound in France, with over 9.6% of growth. In Germany and Central Europe, we experienced solid growth with over 7.1% and our Oil & Gas and Nuclear branch was also up 3.2%. North-Western Europe was the only segment to be down, but you will see later that margin has strongly recovered, thanks to our successful performance initiatives. All in all, organic growth for the group was over 3.2%, while acquisition contributed on top 1.8%. So organic growth for all segments, except North-Western Europe. Looking at quarterly organic growth. Obviously, in Q2, we had a strong rebound compared to the very depressed Q2 2020. And as for Q3 and Q4, these 2 quarters were somewhat impacted by the last waves of the COVID infection. And in addition, Q4 specifically was impacted by 2 adverse events: supply chain disturbances, especially in our ICS area and the lack of a large data center contract in the U.K. So together, 2.7% organic decline. Q1 2022 will definitely see a return to organic growth, as we start the year with a record backlog. The 2 first months of 2022 definitely point in that direction. And combined with the record backlog that I mentioned, they are supporting our 3% organic growth guidance for 2022. Looking at Q4 2021 margin, which is a very good performance, up 20 basis points compared to Q4 2019. Let me first remind you of our quarterly trend in Q1 and Q2, EBITA margin was in line with 2019 level. We started to accelerate in Q3 with a margin up 20 basis points compared to Q3 2019, and this was confirmed in Q4. The main driver came from North-Western Europe. In Q4, EBITA margin was up 160 basis points compared to Q4 2019, thanks to our performance initiatives in the Netherlands and the reorganization in the U.K. Q4 EBITA margin was up 20 basis points in France. It was back in line in Germany and Central Europe, but already up 10 basis points in Germany alone. In Oil & Gas and Nuclear, it was down compared to Q4 2019. This is due to oil and gas, but it remains at a very good level, with a double-digit number overall, and we expect further progress in 2022. So bolt-on acquisition, as you know, we operate in very fragmented markets, and we have many opportunities to enrich our competencies and our customer portfolio. This is key to our growth and value creation model. In 2021, it is a good illustration in this regard. We were very active during the year with 8 acquisitions totaling EUR 277 million in full year revenue, well above our target of EUR 200 million. Germany and Central Europe alone accounted for EUR 202 million of revenue, with 6 acquisitions in key segments such as automation systems, telecom networks, HVAC, and tunnel systems. In France, we accrued EUR 75 million of revenue with 2 acquisitions, one of them being a significant acquisition in data center infrastructure. Overall, as you know, we remain very disciplined in terms of multiple, so 6.8x EBITA on average. This is stable compared to previous year. Most of these are done on a one-on-one basis on the back of our intimate market knowledge, excellent integration track record, which gives us a strong reputation on the market, and clear pure-player strategy. So on top of this bolt-on, we acquired Worksphere and closing has taken place in January 2022. It's a significant acquisition, 1,900 employees, revenue in 2021 of -- sorry, EUR 415 million. The company is a leading specialist in smart and sustainable building services, with a strong expertise in data-driven energy efficiency solution. With this acquisition, we are now the largest multi-technical service provider in the Netherlands, with revenue of EUR 1.2 billion. We are the partner of choice for over 2,500 customers throughout the country, with a unique employer brand, resulting in increased attractiveness for technical talent. And with the integration, which is now well underway, we are anticipating at least EUR 9 million of cost synergy to be delivered over the next 18 months. As we expect this new Dutch perimeter will reach the group average EBITA margin within 2 years. This acquisition was fully financed with the group own financial resources and it will result in a high-single-digit EPS accretion as soon as 2022. So obviously, besides our strategic bolt-on deals and the acquisition of Worksphere illustrates the relevance of midsized, highly synergistic and low-risk transaction to drive growth. And going forward, strategy will continue to be part of SPIE's acquisition strategy. Now, moving to our activity by segment. So in France, a sharp rebound in revenue and EBITA 9.6% including an 8.9% organic growth and 0.7% growth from bolt-on acquisitions. Margin recovered from 4.6% in 2020 to 6.2% in 2021. And Q4 2021 is 20 basis points above 2019 level. Technical Facility Management fared fairly well, even very well. It was driven by growing customer needs and energy efficiencies and digital solutions. Commercialization was resilient and started to address projects related to the stimulus plans for public customers. As an example, the city of [ Cergy, Ile De. ] the local authority, with a reduced building energy consumption by 56% and carbon footprint by 79% thanks to the new installation we are providing. Telecom networks and Smart City services continue to be overall dynamic. Industrial Services, they did remain below pre-COVID levels, primarily due to aeronautic and to a minor extent, our exposure to automotive sector. Information and Communication Services were impacted in Q4 by supply chain delays. As you have seen, Arnaud Tirmarche has been recently appointing (sic) [appointed] Managing Director of SPIE France. He brings his intimate knowledge of the market and his strong business development skills. On Slide 18, Germany and Central Europe. Revenue increased by 6.9%, including a robust 2.3% organic growth and this is against a very resilient 2020. Growth from acquisitions was 4.8%, and currency movements accounted for minus 0.3%. EBITA margin was at 5.9%, recovering from 5.1% in 2020. It was 20 basis points below 2019 level, but actual previously, Q4 EBITA margin was back to Q4 2019 level. In Germany alone, revenue grew strongly by 3% on an organic basis and 6.5%, including acquisition. Transmission and Distribution Services continued to be fueled by energy transition investment, with a 9.5% growth in transmission with excellent margin. Technical Facility Management delivered strong performance, benefiting from its positioning as an energy efficiency partner for its customers. Again, information and communication services suffered somewhat from the exposure to the corporate events sector and also from supply chain delays. And building technology and automation enjoyed a strong activity in data centers. As mentioned previously, EBITA margin in Germany was already 10 basis points above its 2019 level in Q4. In Switzerland, we recorded a strong rebound in revenue despite supply chain pressure in Q4 for the information communication system. And in other Central European countries, we had strong revenue growth, thanks to acquisition, while revenue in Slovakia was done organically through some contract postponements. Looking at North-Western Europe. We've achieved a very strong margin improvement, up 70 basis points compared to 2020. So this is significantly reducing the gap with France and Germany. Margin was up 140 basis points compared to 2019 over the full year and up 160 basis points in Q4. So the region is really on a strong trajectory to catch up with the group's performance. The Netherlands, EBITA margin increased significantly for the second year in a row, resulting from performance initiatives started in 2019. Revenue was slightly down in 2021 because of some shifting revenue in telecom services, but this has shifted into 2022, it is not lost. Industry services had a slow start, especially petrochemical, but it did stabilize during the year. Infrastructure Services are buoyant, fueled by public investment in energy transition and the so-called wet infrastructure. In Belgium, the market environment was contrasted. Trends were good in energy and transport infrastructure, whereas the building sector remains subdued. Information & Communication Services were impacted by supply chain delay in Q4. EBITA margin was in line with pre-COVID level. As I said, in the U.K., revenue was hit by the lack of a large data center contract. We usually get one every year, except this year. EBITA margin and cash generation showed a steady improvement resulting from the subsidiary's recent reorganization. And finally, Oil & Gas and Nuclear. We recorded a 3.2% organic growth. Under improved market context, Oil & Gas Services returned to growth in the second half of 2021, and EBITA margin remained at a very good level. In addition, a strong commercial performance translated into a high order backlog for 2022. As for Nuclear Services, we did recover despite the ongoing workload reduction at the Flamanville EPR contract, which is now nearing commissioning. We had a very good EBITA margin as always. And as you have seen, the recent decision of the French government bodes well for the future of this industry. Altogether, for the segment, EBITA margin improved 10 basis points compared to 2020. I will finish this part of my presentation with a word on our shareholding structure. As you have seen, we are very pleased to welcome Bpifrance as a shareholder through its recently launched lac1 fund. Bpifrance is a strategy of being a long-term, stable and value engaging shareholder. And I would also like to highlight the importance of our employees and management shareholding base, representing now 8.2% of the group. Last December, we finalized our new employees shareholding plan for year 2021, which was met with very strong support. Around 11,000 employees from 13 different countries has come to the plan and 3,000 sites -- 3,700 employees subscribed to the plan for the first time. So we are proud that more employees decided to become a shareholder and part of the future, and we're obviously very grateful for the support and dedication to the group. Now, I will hand over to Michel, who will comment our financial performance.

Thank you, Gauthier. Good morning, everyone. So as Gauthier said, this is my last conference call as CFO of SPIE. I have really enjoyed this past 2 years, busy years. It was hard work with the teams, but a real pleasure. I have no doubt that the hand over to Jérôme Vanhove, who knows the company in and out, will be an easy one. Of course, I will remain a great supporter of SPIE as a shareholder, modest shareholder. Let's move now to the key figures of the income statement. I'm on Slide 23. We achieved a strong rebound in U.K. figures in 2021. The group revenue reached EUR 6.971 billion, which means a total growth of 4.9%, in line with our guidance to catch up with 2019 level. EBITA was EUR 427 million, so up 25.7% and the EBITA margin was at 6.1%, so up 100 basis points compared to 2020 and up 10 basis points compared to 2019, in line with our guidance. Adjusted net income was up 38% to EUR 243 million and net income was at EUR 169 million. On this slide, we see the revenue bridge and 4.9% revenue increase that takes into account 5% increase at constant ForEx, of which 3.2% is organic growth. The scope effect from acquisitions amount to 2%, originating only from bolt-on acquisition and remind you as well on this chart, the impact of the sale of the U.K. mobile maintenance activities completed in March 2020. On Slide 25, we show you the adjusted net income and the increase of 38%, which is directly linked to the strong increase in our EBITA. Our net interest charges were slightly reduced due to our lower debt and our adjusted tax rate was slightly down at 31.7%. Worth to note that our adjusted net income is above 2019 level, up 6.6%. On Slide 26, our reported net income amounted to EUR 169 million. The restructuring costs are close to 0 in 2021 compared to EUR 24 million in 2020. I'll remind you that last year, restructuring costs were related to reorganization made in the U.K., in Oil & Gas services in the Netherlands and more generally in activity sectors, particularly impacted by the sanitary crisis like aeronautics, events in France and Germany. Other nonrecurring costs were around EUR 20 million. This amount includes acquisition costs and other costs related to long-term incentive plans and employee shareholder plan. And I remind you that in 2020, the number that you see, EUR 57 million of costs included the impact of the disposal of the SPIE U.K. mobile maintenance activity for more than EUR 40 million. Let's move to the cash flow. And in 2021, Gauthier highlighted already, we achieved really a best-in-class free cash flow generation. As you know, it is a strong focus of the group at all levels. The free cash flow reached EUR 268 million in 2021, with a cash conversion rate close to 100%. And I'm sure you realize this is a very strong performance given the full payback of the social charges and taxes that were deferred from 2020 and that we had to repay this year for EUR 141 million. So this charge show that excluding this, our free cash flow has reached more than EUR 400 million, a record level. So you can see also on this chart that the cash conversion and the free cash flow since 2015 has been really, really strong. So since IPO in 2015, the cash generation have been steady and solid. We have generated more than EUR 1.8 billion free cash flow in the years, demonstrating the strong business fundamentals and the strict financial discipline. And this came with, of course, again, a significant improvement in working capital. Over the past 12 months, we have continued to strip -- for strict working capital management, a key pillar of our financial model, and our structural negative working capital represented 43 negative days end of 2021, December, which means 6 days improvement compared to the underlying basis at end of 2020, which was 37 days when we exclude the impact of the social charges and taxes that were deferred. So you can see on this chart the evolution and the progress made on the working capital, improving from minus 21 days at the end of 2015, the year of IPO, to minus 43 days in 2021, so an improvement of 22 days in 7 years, 11 days over the past 3 years. So this is a significant achievement, thanks to the day-to-day hard work of the teams and the efficient processes implemented in all layers of the organization. Our net debt decreased by EUR 52 million in 2021 and amounted EUR 874 million at the end of the year, including -- excluding IFRS 16 here. As you can see on this slide, our operating cash flow amounted to EUR 411 million, then we have paid for EUR 118 million of taxes and interest, EUR 67 million, specifically for the taxes. We had cash expenses on the restructuring plans that were launched in 2020. So these are included in EUR 25 million, which includes also, the due diligence cost for EQUANS. And then this lifts were free cash flow of EUR 268 million, as already mentioned. Then we paid EUR 159 million for acquisition, EUR 92 million for dividends and the last positive number, EUR 35 million, is mostly related to the cash received in relation to the employee shareholder plan. So the debt at EUR 874 million before IFRS 16 at the end of the year meets a leverage of 1.8x. And you see the evolution of the leverage and -- on this chart, decreasing strongly in 2021 from 2.4 to 1.8x, which is an all-time low at the end of 2021. And you see that at the end -- at the time of IPO, in 2015, the leverage was 2.6x. It was 3.3x in 2017 after the acquisition of SAG and of course, it has decreased significantly since then to the all-time low now. So today, we have a strong financial position, and we intend to stay at this level at the end of this year, even after revenue acquired works there, and additional bolt-ons. So we ended 2021 with a sound financial structure. We have no debt maturity before June 2023. Our liquidity is very strong, by EUR 1.8 billion, of which EUR 1.2 billion in net cash. Our credit rating remains unchanged, BB rating as Standard & Poor's and Fitch. As mentioned, excluding IFRS 16, our net debt was EUR 874 million, and IFRS 16 impacts amount to EUR 390 million. You can see it on the bottom right of this chart and the impact of IFRS 16 represents 0.2x on the leverage. To be noted, thanks to the improvement of our leverage below 2x EBITA, the cost of our term loan will decrease from Euribor plus 1.4% to Euribor plus 1.25%. You see it on the upper right side of the chart. And the same will apply to our revolving facility, from Euribor plus 1% to Euribor plus 0.85%. So as Gauthier mentioned earlier, given our strong financial results and position, the group will recommend EUR 0.60 dividend per share at our next shareholders' meeting. This represents a 40% payout ratio in line with our dividend policy. We already paid EUR 0.30 (sic) [ EUR 0.13 ] as an interim dividend in September 2021, and we will pay the remaining EUR 47 (sic) [ EUR 0.47 ] on May 24. In September, we will pay, as usual an interim dividend amounting to 30% of the approved 2021 dividend. So since our IPO, our capital allocation policy has been driven to deliver enhanced value to our shareholders. And as you can see, besides the 2 years hit by the pandemic, the value of our dividends has been steadily growing. This concludes my part, and I will now hand back to Gauthier.

Thank you, Michel. Now, a word about the thing which is really at the heart of our business model, our corporate social responsibility. So in 2021, we continue to make good progress in aligning our business to CSR regulation. And specifically, 42% of the group 2021 revenue is now aligned with the European Union taxonomy that is up 1% compared to last year. I can say with confidence that we are a front runner in this matter. We have been calculating our score for 3 fiscal year now, starting at 35% in 2019, with nonstop progress since then. And we have set the objective of reaching 50% of our revenue in 2025. Beyond the EU taxonomy, we also calculate that 65% of what we do mitigates climate change, and we do this using the NEC methodology. So we are identifying all of the activities that contribute to the shift to decarbonize and electricity production, better energy efficiency of building cities and industry and the shift to a sustainable mobility. We have made familiar the NEC at our last Investor Day, so I'm sure that you will remember the methodology from there. We have also announced our CSR objective. So Scope 1 and 2, reducing the carbon footprint by 25% until 2025 and 67% for Scope 3 and also, working on health and safety and diversity with an increase of 25% in -- of women in key management positions versus 2020. These targets have been approved by the Science Based Target initiative, so they've been validated by this institution, which is obviously an important step which we managed to achieve towards the end of the year. So where are we today? We are starting. So our direct carbon footprint down 2% compared to 2019. At constant perimeter, it would have been 5% as the impact of the acquisition. And you see that our building-related emissions decreased by 7%. Obviously, an important way forward is electrification of our fleet, we're working hard on it, and this will be the main driver. Valuing our people is key to our business, and I will not cover all the figures in this slide. I mentioned also, the -- already the employee shareholding plan. I'm pleased about the fact that we managed in 2021 to reduce the voluntary turnover. It has gone from 8% in 2019 down to 6.8% this year. This is very important and talent attraction and talent retention is key in our business. So I was really pleased about this evolution in the context of skill scarcity. Our focus are reflected in the rating by the various ESG rating agency. And I just want to mention that with rating at 15.7% with Sustainalytics, we're among the top 5 companies rated by Sustainalytics. And now, turning to the outlook. Just a short reminder of who we are today. So we are the independent European leader in multi-technical services and ranking altogether #3 in Europe. We have built a strong position in a number of important countries, and we have now 3 countries generating more than EUR 1 billion revenue. Thanks to the acquisition of Worksphere, we are #1 in the Netherlands. And Netherlands is a very sound country for our business. I'm really pleased that we managed to establish a very strong position there. Just a short reminder on our business model, and we chose to look at our performance since 2015, which was the year of the IPO. So you see that since December 2015, the business model of SPIE, as we have described to you several times, has been delivering. We had EUR 1.7 billion in free cash flow. We paid EUR 0.5 billion dividend. We managed to reduce significantly our debt, and we spent more than EUR 1 billion in acquisition, EUR 0.5 billion in bolt-on and then SAG. So really, this model works, it delivers. It is very resilient, and it is able to deliver growth as well. Now, to the outlook 2022. So in organic growth, we are looking at at least 3%. So it would be an increase compared to the pre-COVID level of 2%. We're looking at the continued EBITA margin progression. We plan to step up bolt-on M&A, looking at the total full year revenue in the order of EUR 250 million acquired from bolt-on M&A. And obviously, this is excluding Worksphere. As Michel mentioned, we are looking at a broadly stable leverage ratio, including Worksphere and bolt-on acquisitions. Obviously, this outlook doesn't take into account any major impact related to the Ukrainian crisis, I should even say the Ukrainian war. At SPIE, we have no employees, no business in Ukraine or Russia. We are closely monitoring any potential consequences on our customer. The proposed dividend payout ratio will remain at 40% of adjusted net income attributable to the group. And I really want to mention that we are deeply touched by the tragic situation in Ukraine and do express our support for the affected people. At SPIE, we have 60 Ukrainian employees that are working in Germany and in Poland. Now, some of them have returned to the country to fight, and I must say this is extremely distressing. We obviously are trying to help the family. And finally, we are pleased to announce our next Investor Day, which will be dedicated to SPIE's medium-term perspective. This will take place on the 29th of April in Paris, at the time where we will communicate our Q1 results. So please save the date. So thank you for your attention. This concludes our presentation. And Michel and I are now ready to take your questions.

[Operator Instructions] And our first question comes in from the line of Simona Sarli calling from Bank of America.

So I have 3, if I may. Starting from the first one. So if you could please provide a little bit more color on your organic revenue growth guidance of above 3%. So what are the building blocks from that? So how much are you assuming, for example, from the tailwind from green investments? And also, in your press release, you mentioned that you had some revenues from ICT that shifted from Q4. So can you please try to quantify the revenue impact from supply chain disruptions in Q4 and when we should expect them to come back in 2022? Yes, I will go one-by-one with the questions. So that's the first one.

Yes. Thank you, Simona. So regarding the impact of supply chain, as you know, our first supplier for the group is Cisco. So we have quite an amount of work in the information and communication system in -- to our country and being Netherlands, France, Belgium, to an extent, and Switzerland. And the delay in this sort of equipment accounts for half -- roughly half of our organic decrease in Q4 compared to last year. And then the significant impact is from the lack of a data center. And the last element is both in France and in Netherlands, some impact due to phasing of FTTH contracts. This, again, I'm not sure, and you see some -- doing with the various operators that there is some shift from one quarter to the other. So this will retrieve in Q4 or in Q1 this year. The supply chain delays, altogether, the main impact has been ICS. We had some minor impact elsewhere, but really the most significant one is in ICS. We see the situation not normalizing, but stabilizing. So it means that what we have not been able to supply last year, we'll be supplying this year. So we do not see any further degradation linked to this supply chain. So it is, in a way, the delay is now contained, and we're pushing it through. So it will help in Q1 this year.

And there was also the other part of the question related to the organic growth guidance of 3%. So how much are you implying in this growth guidance related to green investments?

Well, it is -- I mentioned during the call that, for instance, in transmission business in Germany, we're experiencing a growth of 10%. So transmission business is completely linked with renewable energy and energy transition in Germany as an example. But similarly, I mentioned the good level of activity in commercial maintenance. So it's true in Germany, in France, in the Netherlands as well. We have an organic growth in this area, which is above average. And again, it is linked with energy efficiency concerns of our customers, so we have a lot of spend in this regard. So -- and then the last bit we mentioned is [indiscernible] and again, we see a good strength in this regard. On top of that, all this is supported by a lot of digitization. So we do see in Q1 this year, a good rebound in our ICS business, especially in France.

And regarding the other questions, so a quick one on your leverage guidance. So just to clarify, flat year-over-year at 1.8x, does that include your guidance for bolt-ons that will be contributing EUR 250 million? So I guess that is like a spend of EUR 95 million to EUR 100 million. And thirdly, if you could give a little bit more context on the reasons for the management changes that you announced this morning?

For the leverage, this is -- I think you have to -- you understood that it's after the bolt-on acquisition. And as you know, with a strict financial discipline that we have, bolt-on acquisition are not really dilutive in terms of leverage or the impact is very limited. And our objective is to offset the impact of the acquisition of Worksphere, which is not a bolt-on. It's a bigger acquisition. So it's -- we're talking about EUR 200 million of acquisition price. To offset it with our -- with the cash flow generated. And this is how we intend to stay at 1.8% in terms of leverage.

Yes. And as for management changes, we -- as I said, Michel has done a good job, but it's certainly time to move on. And we have a very good success with Jerome, who, as I said, has been working nearly 15 years directly with me and is -- has intimate knowledge of our business. The other changes that pertain to -- regarding France, I wanted to give a new boost to the activity. As you know, management is not a marathon. It is a relay course. And so after a period of strong organization of our French business, which has been done very successfully, now, I want somebody with a strong focus on business development to go forward.

The next question comes in from the line of Ebrahim Homani, calling from TIC (sic) [CIC].

Two questions, if I may, the first one about the acceleration of the EBITA margin in the Q4. The second one, about the level of free cash conversion ratio to expect in 2022?

Regarding margin, well we -- basically, we had to adjust impact of COVID, then we have lost a number of very profitable customers. For instance, the trade sales in Germany. So you see where to refocus, find new customers, adapt the structure. So it has been done in every country. And so now, we are reaping the fruit of all this minute measures which have been taken everywhere at every level. And we also do see, in some areas, some leverage on price due to scarcity of skills and high demand of our customers. So we are able also to leverage the prices. And so there's all these combinations, which have allowed us to beat the 2019 margin everywhere in Q4 and it bodes well for the margin expansion that we are targeting for 2022 and beyond.

Concerning the cash and the cash conversion for 2022. So our guidance is really focusing on the leverage, but I can give you some information to better assess the performance we are expecting in 2022. So the first goal would be to try to keep the working capital performance as it is, because I think, at minus 43 days, this is a stunning performance. I think our first priority would be to try to -- of course, to improve if it's possible. But first, I would say, would be a bit modest. And I would say keep it at this level would be already a great performance. The cash consumption, we always try to aim at 100%. So this year, despite the reimbursement of the social charges and taxes, we were close. I'm not saying this is something we will guide for next year, but keep in mind that it's always the goal to try to be at 100%. Now, I have to warn you on one element of the free cash flow for next year. It's the tax payments. Why? Because this year, we paid EUR 67 million of taxes, okay? This was based -- when you pay in France and in Germany, you pay this year, let's say, in 2021, we paid our taxes based on our -- you pay tax advances based on your 2020 results, okay? 2020 results were low because they were impacted by the COVID, okay? So in 2022, we have to pay the difference between the advances paid and the actual calculation, okay? That will be a true-up and will be a cash impact. And in '22, we will always pay -- we also pay our cash advances on tax based on 2021 results, which is higher than the 2020. So just to tell you that the taxes in cash will almost double next year, okay? But if you compute the math, you will realize that we could have a free cash flow in the same range than this year despite this increase of taxes and digest the acquisition of Worksphere and the acquisition and reach the same level of leverage than this year.

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

Three from me, please. Firstly, following up on the cash flow. I wanted to ask about the EUR 108 million increase in accrued invoices. What drove that? Was that related to the tax things you just discussed? And is that sustainable? Secondly, I was a bit surprised by the EUR 9.2 million exceptional costs for EQUANS' due diligence. Is it fair to say that suggests that your M&A capabilities aren't generally prepared for larger deals? And would you be reluctant to enter a similar process in the future? And then lastly, I wanted to ask about the potential risks to SPIE given that financial markets are currently worrying about inflation reaching levels we haven't seen in Europe since the 1970s. I appreciate that even you, Gauthier, weren't at SPIE back then and obviously, you've got a good track record of passing on inflation, but do you think SPIE will find it harder to protect margins if clients suffer from 8% to 10% cost inflation rather than just low single digits?

I will first answer on the working capital. Yes, there is an increase of accrued income. And in terms of days dimension, you are highlighting, are correct, of course, but in number of days, it represents about 6 days of revenue. You have to look at this in relation with the advances received. So because -- in Germany, as you know, we don't invoice, like in France, the contracts. [ You reverse ] most of the time the completion of the contract, so you get advances as a counterpart. So due to the high activity that we have in Germany, that we enjoy in Germany in the second half, it's normal that you have an increase of accrued income. And as a counterpart, you have the advance received. So overall, the one is offsetting the other, okay? So there is no real cash impact. For EQUANS, this was already disclosed at the end of September results. So it's a EUR 9 million due diligence cost because this was an exceptional project, of course. You recognize the size of the project and the effort that has been put in place with advisers, bankers, auditors and so on, and these are external costs that are one-off, of course, because these type of projects are quite extraordinary.

Yes. And obviously, we -- there was some significant strategic interest for EQUANS. And also, we want to buy the cat in the bag. So there was a huge effort in divisions to try and understand the business, which led us to the conclusion that we didn't want to pursue the opportunity, but I think this was worthwhile spend in regards with the discipline that we need to show this sort of days. Coming to your question regarding inflation. Well, first, as you know, salaries account for roughly slightly less than 40%, exactly 39% of our cost base. And obviously we have managed to remain very disciplined in terms of salary increases this year, so more in the range of 2%, 2.5%, 3% across the board. So we see an important element. As you mentioned, we have always been able to pass inflation in the past. We have indexation clauses in our contracts. We have a fast ruling of our contracts, so we do include the new prices in our tenders, and managed with customers to really frame up the final bid, just before the order, and then we place the main orders and protect ourselves against further inflation. So a lot of discipline is exercised in this regard. And as we heard the question several times in the past -- across the different years, as you have seen, it has never an impact on our margin expansion. For me, the question is more towards indirect effect of high inflation on the whole economy. So it is included. That's why we mentioned that we see uncertainty deriving from the Ukrainian war, but this is not the issue of passing the inflation to customer. It is more the impact on customer relation. Again, the high inflation, as we mentioned, a good part of it is linked to energy. And you will see our energy costs are not very significant. To give you an order of magnitude, the whole cost of fuel within SPIE and for our vehicles, trucks, et cetera, is in the range of EUR 50 million. And in the past, it was always very easy to pass this cost to the customer.

The next question comes in from the line of Oscar Val calling from JPMorgan.

Good luck in the future, Michel. I have 3 questions. I guess, the first one going back on inflation. You talked about wage inflation you saw in 2021. Could you give us a sense of the wage inflation you think you will see in 2022? That's the first question. And then the second question is around employee scarcity. In the past, it's been an issue of finding electricians. Is that still an issue in some regions? And then the third question, again, is going back on M&A. First of all, just to understand, was the Worksphere acquisition competitive and who were you bidding against? And then the second question there would be, when you look at your pipeline, are they mostly bolt-ons? Or should we think about some medium-sized deals as well potentially coming in?

Well, regarding inflation for -- we have negotiated with our workforce. So now, we have established the salaries for this year. Clearly, during the course of the year, we will also start negotiating for next year, et cetera. And we expect that with the current environment, there will be some higher demand than before, so we'll have to deal with that. But again, this year, we have budgeted with some salary increase, clearly. And when we budget for 2023, where we also budget accordingly. And so again, it is -- we have indexation clauses, et cetera. So in many instances, the pass-through to the customers is extremely fast. In other cases, as we mentioned during COVID times, the COVID cost linked to protective equipment, et cetera, and we are also ad hoc negotiation with the customer. But again, I don't think you have seen a lot of impact on that in the past, on our margins. Scarcity of employees, it remains true all over the area, especially technicians, obviously, engineer, HVAC engineer, automation, information and communication system or -- these are hard to get, and that's why it's very important to keep them. That's also why we are very adamant about employee shareholding, because it is a very good way to create a midterm link with our employees. And then we do focus a lot about training. That's also why we try to increase the number of women in our organization, because it is another reservoir to tap from. And we have a number -- we have a large number of initiatives for attracting people and training them from other skills to be able to join SPIE. And also, we focus a lot on apprentices. So we are dealing with this with all our means. It is a very important focus. The fact is customers are also aware of skill scarcity, and it makes them cautious when it comes to renewing a contract, because they know what they lose, they don't know what they get. So in many instances, they don't take the risk and they stick with us. And then regarding Worksphere, yes, to the competitive process, clearly, which we have to deal with at the time, we're also deal with -- at the time we're also dealing with accounts. So I can tell you it has been a busy time. We did win because we clearly got the preference of the management, and we were able to convince the management by the fact that we are creating the #1 in the Netherlands, and we were a pure player. So they've been belonging to a construction company, [ after time ]. They were very happy to join a pure player and to be real core business within SPIE. I think that, that way, we remain disciplined on price and that the world deal has been done at a very reasonable multiple comp, looking at the size of business and the strategic interest of the business. And as I said, integration is progressing very well. We have -- I met again, a few days ago, the management team and they're very positive about the arrival within SPIE and the way integration is being prepared and now, deployed between the 2 teams. Going forward, yes, there are a few deals of significant size. Difficult to talk about timing, but we know of a few assets of significant -- of a similar size, which could be very interesting for SPIE going forward.

Very clear on M&A. Maybe, just a quick follow-up on the inflation. It wasn't 2023, it was 2022. Should we think about '22 inflation, cost inflation on the wage side as being locked in already with the employees?

Well, it is -- yes, you could look at it as being locked in. It doesn't prevent another one local negotiation here in there or specific issues we might encounter. So -- but basically, there's a broad basis.

The next question comes in from the line of Charles Scotti.

I've got 3 questions, if I may. The first one on your profitability target for 2022. You said you are expecting a further improvement. But can you help us quantify this expected improvement or at least, give us more color on the moving parts, for example, the impact of the Worksphere acquisition, which might be dilutive, upfront? My second question regards the Nuclear and Oil & Gas business. Can you tell us if you expect any massive tailwinds from the new emphasis on nuclear power plants in France and also, the recent spike in oil prices for those 2 activities? And finally, coming back on the data center contract in the U.K. Are there any other sizable contracts in the U.K. that might be at risk?

Good. Thank you. So regarding margin '22, yes, we mentioned at the time of the Worksphere acquisition, there was a slight dilutive impact of Worksphere. But clearly, it will not prevent us from further growing our margin in 2022. As I've mentioned that midterm target is to be, I mean -- midterm, meaning not too far away, and we think 6.5% and clearly, we think that 2022 will be a stepping stone in this direction. Regarding Nuclear, I think we -- people have not started to realize how massive the new nuclear program will be in France. We are talking 6 new EPRs, and we are taking a number of smaller reactors, smaller EPRs with a range of 1,000 megawatts. And the smaller ones, which have been mentioned are in the range of 170 megawatts. So it's not a backyard unit; it's something significant as well. Overall, this new program, which has been announced by the French government, it's roughly half of the historical nuclear program of the '70s. So meaning, long term -- midterm and long-term perspective for the nuclear industry in France are huge. And EDF is also very, very aware of the difficulties caused by some loss of industrial skills in France, which affected the EPR program. So it will clearly have an impact -- direct impact on our Nuclear business, but also, direct impact on our Industrial business as a whole. So I'm not saying it will happen overnight, but it gives very strong midterm and long-term perspective for the nuclear business. Now, turning short term, we -- something which will happen even earlier is the fact that in the frame of this program, the life span of the existing nuclear plants will be further extended. So you are familiar with the Grand Carénage. So it now appears that there will be more work, part of the Grand Carénage or Grand Carénage 2.0 to further expand the life span of the nuclear plants. And so really, going forward, it is an excellent perspective for the nuclear industry and then, for SPIE. And maybe, it is worth mentioning since we've been addressing taxonomy this morning, that European instances have not decided that nuclear will be part of the green taxonomy. It would have an impact for our business maybe, on our green share of maybe 2%, maybe a bit more, but it also helps a lot in terms of financing these programs. So very positive news regarding nuclear in France and some positive noises, also, heard from other countries right now. Regarding Oil & Gas, we had already enjoyed a better level of the oil prices, so more and more in the range $70 and $75 a barrel. In the last year, the oil companies have drastically reduced their neutral cash points regarding oil production, which is now probably below $40 or closer to $35 a barrel where they start to be cash positive. And we see the existing situation will -- in the first instance, encourage them to spend adequate money to ensure that production is not decreasing. So it will help our OpEx activities, clearly, and we start to see that. So altogether, it is a positive for our markets in Oil & Gas, going forward. And regarding U.K. In fact, every year, we have one large data center contract with a recurring customer. This year, we had a disappointment and a lot of people change as a customer. They were bought by another company. So shareholding changed, management changed, and they decided to track somebody else than us to do their data center. So maybe, it will come back, I don't know, but this is one instance of a major contract, which was altogether, the impact on 2021 was in the -- sorry, on 2020 of such a contract was in the range of EUR 40 million. And clearly, this was a very specific type of contract. We have nothing of the kind left. So no worries in this figure. Together, I can say that our U.K. business has stabilized and we had a positive year in 2021, also, slightly positive cash flow. And at the beginning of the year has been good, we are beating forecast in U.K., which doesn't happen often. So not too bad a start.

The final question comes in from the line of Nicolas Tabor calling from Stifel.

The first one would be try and have, let's say, comparison of trading a bit between what you saw in the beginning of the year, maybe -- so maybe you start seeing a catch-up in ICS on the ground. But what are the latest news you received from your teams over the past week? I mean, we received news from other companies that supply chain disruptions are increasing more and more with Ukraine. With going into semis and so on and then discovering that truck drivers in Eastern Europe were actually Ukrainians. With snowball effect, do you see some pressure at your client facilities? That means that they will need less, I don't know, increased installation and so on. And therefore, we slow down your activity? Do you see this kind of risk at the moment? Or did you -- don't get any feedback from your clients for now? And then the second question would be on Worksphere. So there was a slight revenue decline in 2021 versus 2020. Why is that? And do you -- what kind of growth do you expect in 2022 for Worksphere? And then finally, in terms of the green deal first impact, what are you seeing in terms of rate of new tenders? And when do you see the first material impact on your revenue growth?

Regarding the impact of the Ukrainian war on the supply chain, we haven't -- except for the major increase in some prices that we are seeing right now, it's early to say, I couldn't mention one example of something which has gone badly wrong in terms of supply because of this crisis. And so I'm not saying it's not going to happen, but the impact, as of today, have not had any specific feedback. We're also dealing with a number of customers, and we want -- talking to all of them and wanting to find out if there will be some impact on the investment program. But again, so far, not received any bad news from the matter. So regarding Worksphere, yes, there's a decline compared to the figures reported in 2020. As you know, there's an element of -those figures -- those 80% are small projects or on the 85% are small projects and maintenance contracts. The maintenance contracts are somewhat large, sometimes large because they have an outstanding customer base. I think the customer base of the Worksphere in the Netherlands for maintenance is really on a par with the quality of what we have in France and in Germany, with large authorities, large private customers, long-term contracts, et cetera. And this was the main attraction for the deal we see. There is an element of larger projects, which is under separately with a dedicated unit, with an excellent track record and I've reviewed recently the track record and the project going forward, I was really impressed. One large project, which was planned to be produced in 2021 has been postponed for emitting issues, so it is only starting now. So it is bad news for the 2021 revenue, which doesn't belong to us. It is good news for the 2022 revenue, which belongs to. And then green deal. Well, I think I already get some elements in this regard. We see effects of the stimulus plan. I mentioned the example for public infrastructure in France. You might be more at the contract with Total Energies with the network, which is also fostered by the green deal in France. And then Mike mentioned major tender we are dealing with now, in Germany, it's called Deutschlandnetz and the German network. And this is our Germany network, and this is a 1,000 location of fast charging points for electrical vehicles in Germany with -- so this tender is -- has been kicked off by the stimulus plan, and it is something that we are working on right now. We have several examples of the client. So yes, the stimulus plan is happening. Going forward and then looking more and more midterm, clearly, all the impact of the war in Ukraine, I think will be major in terms of energy behavior in Europe. It can only lead to a decrease of fossil fuel dependency and especially from Russia. The only way to address this is to accelerate renewable, probably reenergize nuclear in certain countries, and we see work on energy efficiency and in mobility to use different source of fuel. So I think midterm, and again, as this war is extremely sad, the midterm for our kind of business, it will have a positive impact.

That was the final question in the queue. So I shall hand the call back across to yourselves for any concluding remarks.

Well, thank you very much for your attention this morning and your interest in taking SPIE. We'll be working very hard to tackle new challenges and we have 2 years of COVID and now, we have to tackle a different sort of challenges. I think we have always proved how resilient we can be. We also assume that we were able to grow even in difficult times, and we'll be working very hard to further demonstrate these abilities in 2022. Thanks a lot for your attention.

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