SPIE SA (SPIE) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the SPIE Half Year 2022 Results Conference Call. I now hand over to Mr. Gauthier Louette, Chairman and CEO joined by Jerome Vanhove, Group CFO. Gentlemen, please go ahead.

Good morning, ladies and gentlemen, and welcome to SPIE's call for our H1 results. So in H1 2022, SPIE had delivered a very strong performance with organic growth accelerating and margins increasing in all segments. We are indeed experiencing a strong demand from our customers. They are increasingly aware of the urgency of the energy transition. They need to accelerate on energy savings, and we are definitely part of the solution. Let's just move to some good examples to highlight what we can bring to our customers in terms of e-mobility, grid connection and technical facility management. SPIE deploys the first network of ultrafast charging stations for electric vehicles in France, partnering with the ecological transport modernization fund. SPIE would cover the entire value chain from installation to operational maintenance and customer services for 13 stations alongside motorways in France. Charging powers will be between 150 and 300 kilowatts. So electrical vehicles can recover up to 300 kilometer range in just 20 minutes. On Slide 3, the shift to renewable energy has become even more vital and urgent with a restriction of Russian gas. And as you know, this is especially true in Germany. Production of renewable energy is advancing, but delivering energy to the grid and ensuring the stability of the grid is key.In Germany, we are a leader in the sales and here is the illustration in Lower Saxony of the installation of 120 kV cable (sic) [ 110 kV cable ] connecting the wind farm to the transformer station. And the next slide is a good illustration of our expertise in technical facility management with the deployment of our innovative digital solutions, Smart FM 360. It tells our customers to better monitor and optimize energy consumption in its buildings. This is obviously key in the context of rising energy prices and carbon reduction imperatives. This solution has AXA to serve 1.5 megawatt power of energy in 2021 and prevented the emission of 184 tons of CO2. Now moving to the key highlights of the first half on Slide 7. SPIE recorded a very strong performance with revenue at EUR 3.8 billion with organic growth accelerating. EBITA EUR 190 million with margin increase across all segments. In addition, we enforced our expertise and offering with a dynamic bolt-on M&A approach leading to 3 acquisitions in the first half. We continue to deliver an excellent working capital performance. As we have announced, we have signed last Monday a sustainability-linked refinancing of our EUR 1.2 billion syndicated loan. On the back of this very strong H1 and with a good momentum of our markets, we are now able to target for 2022 a stronger organic growth of our revenue of at least 4% and an uplifted EBITA margin at 6.3% of revenue, keeping up with a 20 basis point increase achieved in H1. So on Slide 8, our key figures for H1, 5% EBITA margin, up 20 basis points compared to H1 2021. Adjusted net income up 29.5% compared to H1 2021, leverage down to 2.8x compared to 3.0x last H1. This is a very strong performance given the acquisition of Worksphere. Bolt-on M&A EUR 120 million of additional annual revenue through 3 acquisitions in Germany and in Poland. We had a 13.9% revenue growth in H1 with a robust 4.1% organic growth. Revenue did accelerate in Q2 with a 4.9% organic growth. On Slide 9, looking at our organic growth per segment. Altogether, we benefited from dynamic markets in all our geographies. Organic growth was at 4.3% in France as well as in Germany and Central Europe. In Germany alone, it was even at 5%. Our organic growth was 0.2% in Northwestern Europe. It would have been a strong 7.1% if we were to exclude the impact of the lack of a datacenter project in the U.K. as we have conveyed in the past. Total growth of the segment was at 30.2%, with the contribution of Worksphere in the Netherlands. The Oil & Gas and Nuclear segment recorded a very strong 13.9% organic growth with a robust [ NICR ] and a great dynamic in Oil & Gas. In total, group organic growth was up 4.1%, with a acceleration in Q2 at 4.9% from the 3.3% in Q1. On Slide 10, regarding our EBITA margin performance, we did achieve an increase across all segments in H1. At group level, the EBITA margin improved by 20 basis points to 5%. Northwestern Europe continue to catch up with the group average. EBITA margin improved by 80 basis points and is now at 4.1%, similar to Germany and Central Europe for the first half. France as well as Oil & Gas and Nuclear improved by 20 basis points. Germany and Central Europe improved by 10 basis points. Overall, this very first half -- this first half was very robust. It reflects the quality of the execution by our teams. Our ability to mitigate inflationary impacts, and Jerome will discuss this more in detail. Our improved pricing power in the context of strong demand and workforce scarcity. We'll maintain this 20 basis point improvement to return EBITA margin of 6.3% at year-end. Moving to Slide 11, our bolt-on M&A is a key pillar of our value creation strategy, as you know well. And during the first half of 2022, we realized 3 acquisitions, sustaining our positioning in mechanical engineering, information communication system and in facility management, adding EUR 120 million of additional revenue on a full year basis. So 2 acquisitions in Germany, PTCTelecom, a technical services for telco solutions company; and a technical facility management activity related to 3 core production sites for German blue-chip industrial company. One acquisition in Poland, Stangl, a leading player for installation services in mechanical and electrical buildings, they are also present in the Czech Republic. Looking forward, we have an active pipeline of opportunities. And now let's go into more detail in each business segment. So in France, on Slide 12, our organic growth accelerated and we delivered margin improvement over H1. As mentioned, we recorded a solid organic revenue growth of 4.3%. We continue to observe a strong appetite for energy efficiency solutions, both in technical facility management and in industry services. SPIE is a key partner to help customer mitigate rising energy costs and accelerate the decarbonization specifically of the industrial assets. We see now a favorable trend also linked to the ambition of reindustrialization in the country. The 20 basis point improvement of our EBITA margin demonstrated once again our permanent attention to operational excellence and our improved pricing power, thanks to our added value innovative solution, obviously, on the back of a high demand from our customers. Slide 13. In Germany and Central Europe, also a strong performance in H1. Germany has strong growth of 5% in H1 2020 of 4.7%, up 20 basis points compared to last year. Energy-oriented markets in Germany are very dynamic, both in technical facility management and city networks and grids. We had a phasing impact for high-voltage lines projects over the second quarter. It will ease out over the year. SPIE is now well-positioned to reduce customers' energy consumption to connect renewable sources of energy to the grid and more recently to help focus of customers in their shift from gas to electricity. So they are definitely key drivers of our top line growth. In the current context, it might be worth mentioning that SPIE had a very limited exposure to new gas network construction. The continued EBITA margin improvement reflects the quality of our execution and our ability to increase prices again in the context of high demand. In Central Europe, our markets were dynamic with an acceleration in Q2, except in Switzerland due to supply chain delay with -- linked to the ICT suppliers, which is a topic we've seen in other areas as well, but it's more significant due to the mix of our business in Switzerland. On Slide 14, in Northwestern Europe. We also had a good top line momentum and a significant margin improvement. In the Netherlands, the good organic growth was mainly driven by energy-related infrastructure activity and industry services. You will remember that last year, our industry services were a bit weak, especially due to the situation of the petrochemical industry. So we see a totally different picture this year. Integration of Worksphere and synergy deliveries are well on track. We are really pleased with the progress of the integration of Worksphere, with the quality of the business, and they are really in a very good dynamic at the moment. Obviously, being now #1 in the Netherlands is a clear advantage to grow business with our clients and to attract talents. The EBITA margin continued to improve, thanks to operational excellence initiatives that are now really bearing fruit. And as you see, the margin of this segment is really now coming on par with the balance of the group. In the U.K., we recorded a solid organic growth in H1. If we were obviously to exclude the impact of this datacenter, we would be looking at double-digit organic growth in U.K. The markets are supportive and our positioning following all the works performed last year is really bearing fruit. So thanks to this turnaround initiative, we have now a positive EBITA margin and a positive cash generation in H1. And finally, in Belgium, we recorded good momentum, especially in Industry Services and in Building Services as well with margin holding up very satisfactory. Now on Slide 15, Oil & Gas and Nuclear, we do have a good visibility with high margin levels. The Oil & Gas Services segment enjoyed a very dynamic growth. We have an excellent order intake and it gives us a strong backlog in Africa, in Middle East, especially Qatar, and now in Europe with a new contract signed in Denmark. So really a good midterm visibility for Oil & Gas. We are always trading at a high EBITA margin. They did improve further in Oil & Gas, thanks to the mix and the volume effect, as you know, due to our presence in several areas, the volume has an impact on the margin for Oil & Gas. The nuclear services segment posted good organic growth, supported by the catching up of maintenance operation, which has been previously postponed during the pandemic and the ongoing Grand Carenage program. Looking at the future, the new nuclear program announced earlier this year by the government does provide long-term visibility for these activities, and we'll need to gear up in the future to cater for this high demand. So really positive about our nuclear segment. And now I will hand over to Jerome to comment on our financial performance.

Thank you, Gauthier, and good morning, everyone. As Gauthier pointed out, we achieved a very strong financial performance in all key metrics in this first semester. Group revenue reached EUR 3.755 billion in H1 2022, a progression of 13.9%, led both by organic growth and the contribution of our acquisitions, notably Worksphere in the Netherlands. EBITA was EUR 190 million, up 18.6%, reflecting the embedded organic growth, the EBITA margin increase as well as the integration of Worksphere. Once again, our margin increase is the result of an enhanced pricing power, our operational excellence and a strong discipline. While the cost of our debt remains stable year-on-year, our financial results has improved as a consequence of ForEx gains. As a result, our net income is showing a strong increase at EUR 72.5 million, up 26.8%. Moving to next slide, Slide 18. This H1 result bridge highlights a robust total growth of plus 13.9% and 13.5% at constant ForEx, of which plus 4.1% of strong organic growth with an acceleration from our 3.3% organic registered in Q1 to plus 4.9% for the second quarter and a plus 9.5% perimeter effect, mainly coming from the consolidation of Worksphere as well as the recurring contribution of our bolt-on acquisitions. Let's focus on the EBITA margin increase. While remaining a daily challenge, we have always been able to pass inflation on to customers in the past. In this context of higher inflation, SPIE benefits from 2 efficient levers to absorb cost increases and protect its margin, notably indexation clauses on our contracts, short-term validity of our offers, the usual short-term cycle of our activities. And of course, we monitor and update our procurement basis and pricing tool on a daily basis. Furthermore, we maintain our ability to increase our EBITA margins, thanks to enhanced pricing power. This is combining a growing customer demand, our mission-critical positioning and innovative solutions. All this with a permanent focus on operational excellence, meaning selectivity approach, pricing discipline and quality of execution. Slide 20. Our adjusted net income increased by 29.5%, mainly as a result of our EBITA performance on one hand as well as supported by stable interest costs related to our debt. Other financial income and expenses, which came out at 0 as we recorded foreign exchange net gains of EUR 6 million this half year compared to a net loss of EUR 2 million in H1 2021. This is mainly explained by the appreciation of the U.S. dollar against euro within our Oil & Gas business. This adjusted net income improvement translated into a double-digit EPS accretion in the first semester. Our reported net income was also up plus 26.8%, which is a significant improvement compared to last year. It included the amortization of allocated goodwill, which has increased by EUR 11 million, reflecting the consolidation of Worksphere as from the 1st of February as well as our 2021 bolt-on acquisitions and the limited restructuring costs related to some integration costs of Worksphere in the Netherlands, while other nonrecurring items mainly comprised the effect of standard application of IFRS 2 and IFRIC 21 rules as well as the exceptional cost of our strategic review currently conducted for our U.K. business. As a key element of our free cash flow, I would like to highlight the excellent working capital performance at end of June 2022 with a solid negative working cap of minus 22 days replicating the improved pattern of last year. Our working capital remains structurally negative all along the year, many thanks to our permanent focus on invoicing and cash collection processes. This chart illustrates also the solid improved seasonal pattern of our working cap over the years. Slide 23. Our free cash flow, usually negative in H1 due to our seasonal working capital pattern, improved by 9.4%, thanks to a combination of our EBITA increase and our good working capital management. This solid performance had been achieved despite the anticipated normalization of the amount of taxes paid during the period. Our total change in debt includes the cash expenditure related to the acquisition of Worksphere for circa EUR 200 million. This good free cash flow performance allowed for continued deleveraging as planned. Our leverage ratio reached 2.8x at -- as at the end of June 2022 compared to 3x as at June '21. Excluding Worksphere, our leverage ratio would have been 2.5x corresponding to an underlying deleveraging of 0.5x in comparison with June 2021. Thanks to the usual reversal of working capital outflow in the second semester, our end of year 2022 leverage ratio is expected to remain broadly stable compared to 2021, including the financing of Worksphere and our bolt-on acquisitions in the year. I would like to conclude this with 2 slides that highlights our sound financial structure. Page 25. At the end of June, our liquidity remained high at EUR 1.2 billion with EUR 615 million of cash and the EUR 600 million revolving credit facility undrawn. As mentioned, excluding IFRS 16, our net debt was EUR 1.47 billion. IFRS 16 has no impact on our leverage ratio at the end of June 2022. I take this opportunity to point out the positive material impact of the increase of the interest rates on our pension obligations. It leads to a reduction of EUR 180 million of the related provision in our balance sheet. As you know, this is booked against equity without any P&L impact.To conclude the financial section of this presentation, I would like to come back on the recent sustainability-linked refinancing of EUR 1.2 billion bank loan signed on July 25. This refinancing contributes to our solid financial structure based on a well-diversified debt structure. As announced, we have secured the refinancing of our EUR 600 million term loan and EUR 600 million undrawn revolving credit facility with now a maturity extended from 2023 to 2027. Apart from securitization, we now have no more debt maturity before 2024. Spread is at 140 basis points for term loan and 100 basis points for the RCF, this at current year-end leverage ratio. This refinancing allows to maintain the high level of liquidity of the group with a very stable, attractive margin conditions. Similar to the existing financing that was already entered into 2018, this sustainability-linked refinancing reflect obviously the high priority given to SPIE -- by SPIE, sorry, to ESG considerations. Its completion is expected in the fourth quarter 2022. This concludes my part. I now hand back to Gauthier.

Yes. Thank you, Jerome. I'm now on Slide 28 and before presenting our 2022 revised upward outlook I would like to highlight once again our ESG commitment for 2025 regarding taxonomy, carbon footprint reduction and people. We are very committed to this objective, and we are very -- we are working very hard to deliver on them. Maybe it's worth mentioning that all our customers are embarking on similar journeys targeting similar reduction. And clearly, for most of them, the clearer path to carbon footprint reduction is fleet of vehicles and real estate. And in these 2 areas with e-mobility solutions and energy efficiency, we can really help them. So this is also a very strong driver for our business. And now looking at our 2022 outlook. So we target a stronger organic revenue growth for the full year 2022. We are now aiming at least plus 4% organic growth in 2022, while we guided at least plus 3% previously. We now target an uplifted EBITA margin at 6.3% of revenue. The other elements of the guidance remain unchanged, EUR 250 million of total full year revenue occurred with bolt-on acquisition. A broadly stable leverage ratio at the end of 2020 compared to end of 2021, and we'll see similar dividend distribution policy. These assumptions are based on the current situation that are subject to no further major deterioration of the current macroeconomic and political context. Obviously, the current environment is volatile, but we are -- we have demonstrated that we are in a key position to help our customers tackle the energy transition and the digital transformation. Our teams have been very efficient in dealing with all these challenges, and I'm very confident on delivering on this new 2022 guidance. Thank you for your attention, Jerome and I are now ready to answer your questions.

[Operator Instructions] And we have our first question from Ebrahim Homani from CIC.

For this strong results, 3 questions, if I may. The first one is about your guidance. Could you please give us more detail on this guidance? Do you anticipate a catch-up of Germany in terms of margin or should we consider the same contribution of each branch in the H2? The second question is about the price and volume effect. Could you give us the split between the price and volume effect of your organic growth? And the last question is about the level of margin in North-Western Europe after the integration of Worksphere as the branch has well-performed in H1 in terms of sales and operating revenues. And maybe the last question, it's not really a question. Are you closer to become the leader in Germany given your recent acquisitions on your pipeline?

So regarding Germany, we obviously, as you know, we have a seasonality in our margin. And so the margin in the half will increase in Germany, and we plan to finish the year at a very solid level and up compared to last year. Regarding the price volume effect, this is a question that we have fairly often, and it is adversely very difficult for us to answer since our services are so diverse, and we have not a common unit measurement like a ton of steel or a meter of cable. And so I'm not in a position to answer this question. Let me maybe say that we think that inflation will probably kick in more strongly in the second half of the year regarding our top line, as we obviously know bidding with new price levers and incorporating the indexation effect and some of them have -- sometimes have a tagging effect before they kick in. So I cannot give a precise split. I think that the price level will -- price effect will be slightly higher in the second half.Regarding Northwestern Europe, yes, we are pleased with the progress. Again, we -- the reasons for the margin improvement [indiscernible] coming from U.K., which is now in positive territory. And then there is an element coming from the historic Dutch business, which has progressed very well over the last year and where the number of operational excellence initiatives, which are -- which have really delivered. And I'm really pleased with the progress in the historic Dutch business, and we -- the margin at Worksphere very much in line with expectations, if not slightly better. So we mentioned that we would have some dilutive effects from a Worksphere for the whole of the Netherlands. It will happen. It will be not more than planned, maybe a little bit less. And so the margin in the Netherlands are going to catch up, I think, quite significantly with the 2 other major areas, which are France and Germany. And as you know, France and Germany are well above the 6%.And then regarding our position in Germany, we are #1 in transmission and distribution system since the acquisition of Stangl. We have [indiscernible] improved this position. And we are #1 in Tekisen with -- and again, there was a recent study of the market and we are well-established #1 position for Tekisen. For the whole of Germany, we are #2. We are still growing. It's clearly the priority area of growth for SP. And as we have mentioned in the past at our Investor Day, clearly, the aim is to have the same size in proportion of the GDP in Germany that we have in France. And so we have room for probably doubling at least in Germany in the future. So it's really something we are working too.

So we have another question from Simona Sarli from Bank of America.

I have 3 questions. I will go one by one. So the first question is related to your guidance that you moved to more than 4%. You mentioned that actually in the second half of the year, you are expecting also a stronger contribution from inflation. So effectively, that would imply like softer volume contribution? And also SI Index that to 2019, that would imply a sequential deceleration in the second half of the year. So is this just trying to be conservative? Or what are the main moving parts that might potentially bring you to quite a bit above the 4% that you are guiding for? That's the first one.

Okay. Thank you, Simona. Well, probably there's always as it's more I'll start -- there's always an element of caution in this. On the underlying, and again, I've said how difficult it is to really distinguish the pricing effect. But on the underlying trend, I must say that the trends are very good, if not accelerating. So that's really the way we look at the auto market and the energy efficiency is all the rage at the moment. Transmission and distribution are doing really well in Germany, but also in the Netherlands and in Belgium, where we're also active in the transmission market. And we will see a revival of the industry in France, and this is the area with -- which we're still suffering last year in France. But this year, we really see a strong revival of the industry with customer spending on the improvement of the asset, but also on decarbonation issues. So we're not seeing a deceleration in H2 at all. Let's be very clear about this, and this is true across the Board and in Germany as well. And clearly, we had a low -- slightly weaker Q2 on the back of a strong comparative basis and for the reason I exposed for transmission, but we see a strong ratio in Germany as well.

Second question is related to North-West Europe. So you had a very strong sequential acceleration also if indexed to 2019. Is this sustainable going into the second half of the year or there was like a contribution, for example, from any chunky contracts in the first half? And also if you can please remind us what is your synergy target for Worksphere? And how much you have already delivered year-to-date?

So regarding the sequential Acceleration yes, we had a good Q2. Again, organic growth per quarter and per country, I might CC some variance from one quarter to the other, as I've mentioned often in the past, there was a good activity also in transmission lines in the Netherlands in Q2 and we have a good exposure to the optic fiber market. And these contracts are sometimes chunkier and more volatility in terms of production quarter-by-quarter. So this is the reason. Altogether, we are very pleased with the growth in North-Western Europe and especially in the Netherlands. And again, we're looking at a very good H2 for this segment.Regarding synergy, maybe I will ask Jerome to give you some light on this topic.

Certainly, you remember at the time we announced the acquisition of Worksphere, we -- I think we planned an annual expected and targeted synergy of circa EUR 9 million. As per our plan, within the first 5 months of the consolidation of Worksphere, we already have circa EUR 1 million within our EBIT. That's really as per the plan, and we are confident to deliver on the targeted synergies in the end.

Yes, these are cost synergies, and it might be worth mentioning that we also have a commercial synergies, which have started to kick in. And with -- right now we have recorded EUR 5 million of orders, which have been linked to cross-selling between Worksphere and the historical Dutch business. So very positive cooperation between the teams and really pleased with the quality of the acquisition and the quality of the integration.

And the third and last question from my side. It was indeed for a little bit more color on Germany and Central Europe. So you mentioned that the softer Q2 was related to the phasing of a transmission contract. Can you give us a little bit more color on the size of this contract? And how the -- will work.

No. And we sometimes have chunkier contracts in transmission lines as we have communicated in the past and sometimes we have contracted in the range of EUR 20 million to EUR 40 million. And then depending on when they start, if they start as planned or not, there might be some elements you have planning permission. You have sometimes some last-minute negotiations with landowners and that sort of thing, which are handled by the customer. So it leads to some variation and this is the main reason for this volatility in the top line. Again, on the back of a very strong Q2 last year and H2 looks very good. So clearly, we'll have a further growth in our high-voltage business for the Euro in Germany.

So we have another question from David Cerdan from Kepler Cheuvreux.

Few questions for you, if I may. First one is related to the U.K. operation. As you're now back to positive profitability, do -- have you changed your views on the future of your U.K. operations? My second question is related to the scarcity of employees. Do you face some difficulties in recruiting and have you been forced to decline some contracts? Third question is, do you face deterioration in the turnover of your employees? And the last one is related to your negotiation with your clients. So you say that you have improved processing power. Do you think that this improved processing power is stall as soon as the supply and demand for employees will be better balanced.

Maybe I will answer to last question, and Jerome will give you some light on our U.K. strategic review. So regarding scarcity of employees, our technical skills are in high demand and probably in some areas in the highest demand as ever. And so it's very important for us to retain our talent. So obviously, we will work a lot on that. One of the key elements is the sense we give to what we do and there is a purpose of the business and they are working in a company with all core business. So this is also a reason why it's important to be a pure player. We are -- it's also important -- why it's important to have a scheme like employee shareholding scheme and to ensure long-term loyalty of our employees. And we see we are very closely monitoring all the compensation and benefits issues. So working very hard on retention, working very hard on attraction as well. The turnover is fairly stable. There is a small trend to increase, but we're talking resignation rate moving from -- they're still in the single-digit range and moving only a little bit. So we are very working a lot on this issue. It -- the fact that the resources are attend in these markets is something our customers are acutely aware of. And this is why in a number of cases, we are able to renegotiate contracts on a one-on-one basis because they know it would be very difficult for -- the customers know it would be very difficult to replace our qualified workforce. And so they prefer to negotiate and colon maintenance contracts with us sometimes without going for tenders. So -- and then it also helps on the pricing power because we're in a position where we can decline work because there's a lot. So around -- so clearly, we have always been very selective with regard to the quality of the customer and the margin expectations, and this is even more true than ever right now. So this is clearly an element of our pricing power.

Regarding the U.K. situation, as you rightly pointed out in the -- our U.K. activities are now in positive territories both in profitability and cash generation. It is as per our plan and I think it is especially the right moment now to consider all the options. This is exactly what we announced earlier in April 2022 before to consider all the valid options, we had to stabilize the business, which is now done.

So we have another question from Oscar Val from JPMorgan.

I have 3 questions. The first one is on Oil & Gas. Could you -- you talked about a good order intake in Qatar and other regions. Could you quantify how significant that is for that division? That's the first question. The second question is going back on labor and wage inflation, I think in the past, you talked about having secured around 3% for the full year this year. How should we think about that between H1 and H2? And is that still the valid level? And then the final question is, if you think about the EU Green deal that's been talked about for a few years is coming through with new contracts. Have you started to see new contracts benefiting from the EU Green deal? Or is that still something to come over the next couple of quarters?

Regarding order intake in Oil & Gas, obviously, we don't give too detailed figures. But it's clearly a double-digit growth that we see on the back of a number of chunky contracts. I mentioned that we have won a large contract in Qatar.We have also won the maintenance of 2 FPSOs, offshore Angola for Total. And for Total as well, we have now won a large maintenance contracts of the assets in Denmark. So altogether, a very good dynamic linked also with the quality of our services and because these are really essential assets and for the customer to entrust them with a given contractor is really, show a strong confidence. So we are very pleased about these wins. But on top of that, and probably what is helping us right now is the fact that we see much more churn works on our existing brownfield maintenance with a customer more inclined to spend in order to debottleneck or maintain the production with given the price of Oil & Gas. So it's really the churn on maintenance, which brings us a good level of activity right now. And these large orders will provide for growth in the future as well. So very positive about Oil & Gas at the moment, both on market dynamics and quality of our relationship with the customers.Regarding labor and wage inflation, it's -- well, you have to differentiate country-by-country. But altogether, it was yes, about 3% at the beginning of the year. There are negotiations taking place in various countries right now. There's a very recent negotiation in the Netherlands, which has taken place. And there's one in Germany with the IG Metall who is one of our major union in Germany. It's -- they are asking for 8% but it's at a branch level, it's not only SPIE. We don't know exactly what it's going to end up probably less than that. And it is also to be understood what will be the time spent. But I think the main thing to understand is that we are perfectly able to pass through this cost to our customers or obviously the ones which are imposed on us on a nationwide level. Well, it's the same for the competition and we see it's easier to pass through, but it's really something we are able to do as is shown already by the fact that we are improving our margin and planning to improve them further. So it's -- I'm not saying it is always easy. Sometimes you need a bit of persuasion with the customer. Again, it's an averment which is more favorable to us, and it helps us negotiation. But at the end of the day, we do achieve this pass-through. And clearly, this is something that now is incorporated in the bids while preparing for 2023. So clearly, it will be -- we do not expect any weight on our margin linked with this wage inflation. And then the green deal, where it's more difficult to answer. I think the general trend is obviously positive. What projects exactly are specifically earmarked green deal, it's more and more difficult to identify right now. And then there are more green deals coming, as you have seen in Germany, the -- what they've called the [ oyster package ], the Easter package. It's a tremendous increase in offshore wind and the talking of additional offshore wind farms in Germany in the range of 50 gigawatts, which is roughly the size of the French nuclear power plants. So it's a huge new green deals coming up. So it really provides for long-term visibility. I can name one contract in Germany, which is clearly linked to this green deal. It's called the [indiscernible]. It's a network of high -- a fast-charging recharge point along the autobahn network in Germany. And this one has been clearly fostered by the group.

[Operator Instructions] And we have our next question from Peter Testa from One Investment.

I just had a couple of questions, please. One is just wonder if you could give a sense on recruitment overall and headcount recruitment that you've seen in H1 and the extent to which the organic recruitment is different in different countries, if there's any comment, I'll go one at a time.

Well, it's -- I mean it's not radically different from one country to the other. We have 48,000 employees at SPIE. Natural attrition rate leads us to usually to hire 2,000 to 3,000 people a year. We're looking at more this year. And we're looking at probably hiring in the range of maybe 4,000, 5,000 to cope with a slightly increased resignation rate, but also to cope with the growth. And then this is not easy to achieve. And clearly, we have to pull a lot of registers to get there.So I will not give you color country by country because basically, it's not dissimilar. All the countries are in the same page in terms of customers' demand and looking for resources.

Yes. Okay. And then there were some comment or expectation after the market consolidation that happened last year that the competitive pricing environment might improve in terms of discipline in some of they, say, French and Benelux markets. And I was wondering if you had any comment on whether that was actually going on? And then whether there's any view on the German operation of [ Ogi ]?

In terms of competitive environment, it certainly has not deteriorated. I think everybody is acutely aware of the situation. If your question is specifically to accounts, it has not deteriorated. We have not seen major changes so far. But altogether, we do not suffer from an undisciplined market so long as you can have the odd case, but generally, it would not suffer from that. And what I can tell you is that when we are bidding the trend now is always to aiming at increasing the margins at which we are bidding.And the other thing -- yes, go ahead. Go ahead.

No, no, please. Please. Okay.

No, I mean the German operation of ENGINO, nothing special about it.

Right. Okay. And then just a question on the debt comment for the year-end at 1.8x leverage more or less. 2 parts. Is that assuming the same working capital days at the end of the year? And secondly, does that basically include I presume only settled M&A at that point rather than anything that might settle in the following year.

Yes, I will take that question. That's -- we said broadly stable. So on circa 1.8x at the end of the year. That is definitely assuming a pretty steady performance in terms of working capital management. You remember, end of last year, we were at minus 43 days end of December, I think that would remain broadly the target for end of this year. This obviously embedding all the cash out related to our bolt-on M&A strategy as well as the cash out related to the acquisition of Worksphere I remember EUR 200 million that occurred in H1.

So we have no further question. So I give the floor back to the speakers.

Well, thank you for your attention this morning and your interest in SPIE. As you see, we have had a very good start to the year. We were operating in favorable market. At the moment we are very happy to be part of the solution in this context of high demand for a greener world, and we'll be working very hard to deliver on our new providers for the year. Thanks a lot, and have a good day.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.