SPIE SA (SPIE) Earnings Call Transcript & Summary

Welcome to the SPIE 2026 half year results presentation. [Operator Instructions] Now, I will hand the conference over to Markus Holzke, CEO, to begin today's conference. Please go ahead.

Good morning, and thank you for joining us for SPIE's 2026 Half Year Results. I'm here with Jerome Vanhove, our Group CFO; and Alexandra Bournazel, Head of Investor Relations. This is my first half year results call as Group CEO, and I'm pleased to be opening it on the back of such a very strong first half year performance, marked by further margin expansions and excellent M&A strategy execution. It also reflects broader long-term trends, particularly around Europe's accelerating drive towards energy and digital sovereignty, which will continue to create attractive opportunities across many of our end markets. I will also start with a few projects to illustrate this. In Germany, we are building the FRA7 AI-ready data center for firstcolo in Rosbach vor der Hohe. The project will provide 16 megawatts of IT capacity and is scheduled for phase delivery through to the end of 2028. We're carrying out 75% of this project ourselves in-house under our One SPIE model, covering all critical systems from power distribution and cooling to fire protection and building automation. The facility is designed to meet very high energy efficiency standards and will run on renewable electricity. This is exactly the type of project where being present across the full value chain makes a difference. Investors who joined us for our data center site visit near Frankfurt at the end of June, saw firsthand on another project. We see more and more opportunities of this kind as demand continues to grow for integrated, energy-efficient data center solutions. In France, EDF has entrusted SPIE present on the Le Bugey site since 2011 with maintaining the highest level of cybersecurity for the strategic systems that monitor and manage nuclear waste processing. Three SPIE entities are working together on this project, combining nuclear, industrial and digital expertise. I was able to see this myself during my recent visit to SPIE's nuclear operations in Gravelines. It was my first visit to a nuclear site as the CEO and a great opportunity to witness the depth of expertise with our teams and how the One SPIE model brings together complementary skills to deliver critical services to our customers. This example in Le Bugey with EDF is a good illustration of both the trust our nuclear services franchise has built over more than a decade and how our One SPIE capabilities are becoming an increasingly important differentiator for SPIE. In Belgium, we're delivering the full electrical integration of a large-scale battery storage facility, including 180 Tesla battery units and a new substation for projects worth more than EUR 100 million. Battery storage at this scale with several hundred megawatt hours of storage capacity is still relatively rare in Europe, and this highlights our strong positioning in energy transition infrastructure. It also demonstrates the strategic value of the European framework agreement we signed with Tesla in 2025 with several ongoing negotiations for additional projects across Europe at different stages of development and of various sizes. More broadly, battery energy storage systems becoming a key market for SPIE across a broad range of customers and technologies. Moving to Central Europe. Over the past few years, our acquisitions have significantly expanded our capabilities in Central Europe, enabling us to deliver increasingly complex integrated projects like this one in Poland. Here, we have deployed a full telecommunications and building management system for the new academy in Poland, including fire detection, voice alarm, CCTV, access control, intrusion and gas detection, all on a single-digit platform. The project was delivered in a particularly demanding environment with around 100 acoustically insulated rehearsal rooms requiring bespoke installation solutions. Now moving to the key H1 highlights. Revenue growth accelerated with organic growth rebounding as expected in the second quarter. Our EBITDA margin continued to expand. Working capital management was outstanding. We kept a dynamic pace of bolt-on M&A, and we are today confirming our full year guidance. This is a very strong first half year performance building on the record results achieved in 2025, and confirms that our positive momentum continues in 2026. More specifically, looking at the key figures of H1, revenue reached EUR 5.157 billion, up 3.6%, including 1.2% organic growth plus 2.7% from acquisitions. EBITDA was EUR 321 million, up 6.9% with margin expansion of 20 basis points to 6.2%. This is a very solid trajectory in line with our permanent commitment gradually increasing our margins year-on-year. Our leverage ratio increased only moderately by 0.2x versus H1 2025 despite more than EUR 640 million of cash out for M&A since the beginning of the year. Let us now focus on revenue growth. Revenue grew 3.7% in H1 at constant exchange rates. The rebound in Q2 confirmed the progressive catch-up scenario we had outlined following the weather-related disruptions at the beginning of the year in Germany and in Central Europe. Germany grew by 4.6% despite a demanding comparison base of plus 15% in H1 '25, and Central Europe was up 13.9%, supported by sustained M&A activity in '25. France grew by 1.2%, a resilient performance overall, which deserves a deeper dive later on in this presentation. Northwestern Europe returned to positive organic growth despite a demanding comparison base of 8.1% in H1 '25. Global Services Energy continued to operate in a more selective market for oil and gas activities and was further impacted by the Iran conflict. Overall, this performance underscores the strength of our model with its well-balanced geographical footprint and diversified multi-technical expertise. M&A activities. In H1, we announced 5 new acquisitions, representing around EUR 670 million of combined annual revenue. In Germany, we significantly scaled up our industrial services platform with ROFA Industrial Automation and SGS Industrial Services, adding together EUR 610 million in annual revenue. The closing of SGS is expected in Q3. We also completed 3 targeted bolt-on M&A in Central Europe, adding together around EUR 60 million of revenue, BLOCK Group and Czech Republic, Invizo in Slovakia and Nemak in Switzerland. As usual, all acquisitions are expected to be accretive to adjusted EPS from the first year of consolidation. Meanwhile, the integration of all 2025 acquisitions is progressing well and according to our plan. Looking ahead, we continue to see a robust and well-diversified pipeline of bolt-on acquisition opportunities across all our territories, enabling us to densify our footprint, further move up the value chain and create more value through the deployment of our One approach. Looking to our EBITA margin. We delivered a further 20 basis points expansion to 6.2%, following the 40 basis points increase achieved in '25. Germany and France contributed positively with margin expansion of 20 and 10 basis points, respectively, while Northwestern Europe delivered an exceptional 90 basis points increase. These 3 segments represent together 90% of the total EBITA in H1. In Central Europe, we expect a catch-up in H2. At Global Services Energy, the margin evolution was entirely attributable to the dilutive impact of the former ROBUR Wind activities, while the underlying business remained resilient in a selective market environment. Once again, this margin expansion reflects our unwavering focus on rigorous contract selectivity, pricing discipline and a high quality of delivery as well as a favorable mix across the group. Looking at the segments and starting with Germany. Germany delivered a remarkable performance in H1 despite a demanding comparison base with organic growth accelerating to 7.3% in the second quarter. This was driven particularly by high voltage and city networks, confirming the progressive catch-up scenario we had outlined following the weather-related disruptions flagged at the start of the year. Beyond this catch-up effect, underlying activity remained very strong, notably in technical facility management. Building Solutions continued to benefit from sustained demand in data centers as illustrated by the project example I shared earlier in this presentation. ICS strengthened its cybersecurity and audiovisual offering through recent acquisitions, while Industry Service delivered another solid performance across automation, logistics, pharmaceuticals, and LNG. Acquisitions contributed 2.2% to this growth, reflecting the acquisitions of PIK and Cyqueo in 2025, while the acquisitions completed in 2026 are expected to support growth further in the second half of the year. EBITDA margin increased by 20 basis points to 5.8%, reflecting continued operational discipline, rigorous contract selectivity and our pricing power. France, strong dynamic in 4 main activities, good resilience overall. Revenue in France increased by 1.2% in H1, driven by a 1.9% contribution from the Artemis acquisition, while organic growth was slightly negative at 0.7%. Looking more closely, 4 out of the 6 divisions continue to deliver dynamic growth, while the slowdown in mature fiber rollout programs and the selective market environment in Building Solutions continue to weigh as expected on the performance. Technical Facility Management maintained a strong trajectory, while industry proved resilient, fueled by demand in solar PV and battery energy storage systems. ICS continued to grow at a healthy pace in cloud, cybersecurity and data management and Nuclear Services delivered a strong performance, underpinned by a high level of maintenance activity in the frame of the Grand Carenage program. The 10 basis points EBITA margin improvement to 6.2% is a clear illustration of the strength of our business model and the quality of its execution. Northwestern Europe delivered a strong performance in H1 2026. Organic growth was 1.9% against an exceptionally high comparison base with momentum building to 4.7% in the second quarter. In the Netherlands and Belgium, T&D remained a key growth engine, driven by substations and power distribution networks. Growth also benefited from continued expansion in data center services and battery energy storage systems as illustrated by the project at the beginning of the presentation. EBITDA margin expanded by an exceptional 90 basis points to 7.8%. This reflects continued operational discipline alongside a favorable mix effect in first half, especially in energy transition services. Central Europe delivered total growth of 13.9%, mainly driven by a 12.7% contribution from acquisitions, reflecting sustained M&A activity in Poland, Switzerland and Austria in 2025. Organic growth rebounded strongly in Q2 with 7.3%, initiating the anticipated catch-up and fully compensating the weak Q1 impacted by adverse weather conditions. The order book continued to build, providing strong visibility. Poland and Slovakia saw continued strong demand in high voltage, supported by grid expansion and energy transition investments and tunnel infrastructure projects continue to underpin activity in Austria. The 90-basis point decline in EBITDA margin reflects the more seasonal profit recognition pattern and the temporary impact of unfavorable weather conditions in Q1, amplified by smaller scale of the countries within the segment. Global Services Energy. Revenue declined by 4.6% in this semester. Against the more selective market environment for oil and gas overall, operations in the Middle East were further impacted by the conflict in Iran from March onwards. Wind activities, on the other hand, continued to grow, supported by the successful integration of the international wind operations transferred from Germany. While the EBITDA margin on the historical parameter remains stable, it decreased by 40 basis points in H1 '26 due to the dilutive effect of these wind activities transferred. Thanks a lot very much for this first part. I will now hand over to Jerome.

Thank you, Markus, and good morning, everyone. Let me start with our income statement highlights for this first semester. Revenue grew by 3.6% to EUR 5.157 billion. EBITDA reached EUR 321 million, up 6.9% at a combination of a 20 basis point margin expansion, as said, to 6.2% and the total growth. Adjusted net income increased by 11.9% to EUR 187 million. Reported net income rebounded sharply to EUR 112 million, which I will further comment on. I'm now moving on to the revenue bridge, which provides a breakdown of our 3.6% total revenue growth in H1 2026. As already pointed out, organic growth contributed plus 1.2%, including a significant rebound to 3.1% in the second quarter, following a weaker Q1 at minus 0.9%. Our bolt-on M&A activity contributed 2.7% or approximately EUR 130 million revenue, driven primarily by acquisitions we completed in 2025, such as SD Fiber in Switzerland, with a smaller contribution from the acquisitions such as Artemis and Invizo that we closed in 2026. The main acquisitions we announced in 2026, namely ROFA, SGS, World Power Services or BLOCK were neither consolidated as at June 30th, nor did they contribute to our H1 reported results. Please note that in the case of SGS, we are still contemplating a closing before the end of the third quarter, so not done yet. The 2026 pro rata temporary contribution from these acquisitions, namely ROFA, SGS, World Power Services will be reflected in our H2 results. The internal transfer of former Robur non-German operations was recorded as a disposal for the German segment and conversely, as an acquisition for both Global Service Energy and Central Europe, obviously, absolutely neutral at group level on the top line. The disposal of a small elevator business in the Netherlands had a negligible minus 0.1% impact and currency movement had a modest minus 0.2% impact, mainly reflecting the euro-U.S. dollar exchange rate. Moving to Slide 21. At EUR 186.5 million, our adjusted net income was up 11.9% year-on-year, primarily driven by the increase in EBITDA. This progression also reflected a slightly lower cost of net debt and the material other financial charges decrease. And this reduction is mainly due to a rather normalized net FX impact, which was largely unfavorable in the first semester 2025. Our normal tax rate increased slightly from 29.2% to 30.2%, reflecting the gradual changes in our geographical mix and the applicable corporate income tax rate, notably the growing taxable profit contribution in Germany. Turning now to our usual bridge from adjusted net income to reported net income, which includes the main noncash IFRS items as usual. Reported net income rebounded sharply to EUR 112 million compared with a loss, exceptional loss of EUR 13.4 million in H1 2025. This is mainly explained by the change in fair value of the convertible bond or derivative component, which I remind you, is a noncash accounting item and did hit significantly our P&L last year. The accounting treatment remains absolutely unchanged, but the impact amounted to EUR 19.7 million in H1 2026 compared with EUR 162 million charge in H1 2025, and this was as a consequence of the very strong appreciation of our share price over that period in H1 '25. The decrease of the amortization of intangible assets is due to the completion in '25 of the amortization of the intangible assets recognized in connection with our SAG acquisition in 2017 and that were amortized over 9 years. The increase in other costs mainly represents acquisition costs that's IFRS 3, in line with our very, very active M&A activity during the first half. Turning to working capital, which remains a very structural strength of SPIE's business model. As you know, we consistently operate with structurally negative working cap in this throughout the year. Last year's outstanding improvement reported as at June end has been finally maintained in 2026 with a continuing focus on intra-year working capital management that was our commitment, minus 28 days of revenue, representing nearly minus EUR 800 million is another outstanding achievement for the first half. Overall, our continued focus on early invoicing and disciplined cash collection contributed to this excellent pattern alongside a favorable mix of activities. Moving to our free cash flow. Operating cash flow reached EUR 163.5 million compared to EUR 25.3 million in H1 2025, benefiting, of course, from EBITDA increase and from the improved change in working capital requirement. As a consequence, our free cash flow turned positive at plus EUR 25.7 million for the very first time in the half year, which -- with obviously EUR 133 million improvement year-on-year. In line with our commitment to protect shareholders' interest, we completed a EUR 59 million anti-dilutive share buyback program in the first quarter of this year at an average share price of EUR 47 per share, representing the same number of shares bought back last year meaning 1,250,000 shares. Overall, net debt increased by EUR 822 million over the first half, reflecting, of course, our very dynamic self-financed bolt-on M&A activity. Moving to leverage ratio. Thanks to our outstanding operating cash flow performance in H1, the leverage ratio increased only moderately from 1.9x at the end of June '25 to 2.1x at the end of June '26, following the nearly EUR 640 million cash out for M&A over the H1 period. Our track record clearly demonstrates the strong deleveraging capacity of our business model with leverage increasing only temporarily following significant value-creative acquisitions during the period. We intend to pursue our dynamic bolt-on M&A while strictly observing our disciplined financial policy. The achievement of investment-grade status from Fitch in April with a BBB- rating and stable outlook marks a very important milestone in SPIE's history, reflecting on our strong free cash flow generation, disciplined leverage profile and increased scale. Building on this, we successfully issued a EUR 600 million sustainability-linked bond in May with a 5 years maturity and an associated coupon of 3.875%, extending our debt maturity profile to 2031 and maintaining a consistently high level of liquidity. This was the case at the end of June 2026 with a total liquidity of more than EUR 1.5 billion, supported by EUR 562 million in net cash as well as EUR 1 billion of undrawn revolving credit facility. SPIE's entire debt profile remains fully sustainability linked in line with our long-term ESG strategy. And 86% of our drawn debt is at fixed rate at an attractive weighted average cost of circa 3.7%. I thank you for your attention, and I now hand back to Markus.

Yes. Thank you, Jerome. Based on these strong H1 results, we confirm our full year outlook. We expect strong total growth driven by further organic growth and a very active bolt-on M&A. We also expect continued expansion of our EBITDA margin. And also, as every year, we intend to maintain a dividend payout of around 40% of adjusted net income. Thank you very much for your attention this morning. And as we like to say at SPIE, it remains a great time to be a European electrical engineer. With Jerome, we are now ready to take your questions.

[Operator Instructions] The next question comes from Aleksander Peterc from Bernstein.

Congratulations for another set of solid results. I have 3 questions, if I may. The first one is on the Q1 weather-related miss. Could you give us an idea how much of that was caught up in the second quarter? Is it more than half or 3/4 or 90%, just kind of a ballpark? Second question on France. Can you still grow this year? If you could explain why we had this relapse into negative territory again in terms of organic sales growth. We had a bit of a bounce into positive and now we're down again. So I'm just wondering what's the direction of travel from here? And then my third question would be, isn't it reasonable to expect that second half margin progress year-on-year will be as strong, if not better in the second half versus what you have in the first half, that's the 20 basis points you just printed. I think the businesses you added are margin accretive and they're quite sizable. So my thinking is maybe there should be an acceleration actually in H2.

Yes. Thank you very much. Well, tackling your first question, idea of the catch-up in Q2. Well, the second quarter was, as expected, very strong. So majority portion is expected to be catched up, but the rest gradually will be catched up until the end of the year. So you're right. France rebounds back to negative growth. Yes, we communicated that the quarter 1 is not expected to be fully go through until the year-end. And business is seasonal, and we see an ongoing decline in the fiber activities and the selective market environment of Building Solutions. Well, we can expect a year-end being better than last year. EBITDA margin, 20 basis points. Well, we tend to deliver what we increased in H1 also at year-end. And so I think we are fully confident to show the 20 basis points improvement at year-end.

And maybe one more word with respect to the accretion from M&A. Bear in mind, Aleksander, that M&A is definitely in what we've done in H1, definitely accretive on a full year basis. When it comes to contribute on a pro rata temporary basis in one -- in the first year, let's see what happens. And so back to Markus' point, 20 bps being ensured for the full year, let's see with respect to M&A effective accretive impact in the first year.

The next question comes from Rory McKenzie from UBS.

It's Rory here. Again, just a follow-up on the France trends. Can you just quantify where we're at in terms of that drag from the fiber ramp down and what we should expect as we head into next year? And also some of your wording sounds a bit stronger in terms of the segments such as Tech FM and ICS or nuclear. So are you seeing a bit more kind of divergent trends within the French market as where spending is being reallocated? And then secondly, I wanted to ask about the kind of European data center market, where I think we're seeing accelerating projects across many countries. I know that historically, you focused on maybe more midsized projects where you can self-deliver the majority of the contracts, I guess, as on your Slide 3 as of today. But how much of that market do you think you can capture with that strategy? And would you ever think about evolving your kind of offering here to address more of that?

Okay. I might ask you to repeat one or the other question. But starting with France and fiber and the situation in the French business. I traveled extensively in my first rebound in France and made myself familiar with the French business. And I think the perception has to be really changed. We suffer from the decline in fiber. But as we said, 4 of our activities are really experiencing strong growth. This is ICS, this is a resilient industry. It's a strong facility, and it's a very strong nuclear business. This is a dynamic, which cannot fully compensate the decline in fiber. And also, we stayed with our policy to be very selective in the Building Solutions market. Well, this being said, we see that order intakes in data centers, order intakes in battery energy storage systems, they will help us in the future to being able to compensate a further decline in fiber, which is going on, but also not keeping us busy for the next years. So we see that, we more and more reach to the bottom line. And well, we will see at the end of the year where we end up. But I'm fully confident that this effect will phase out over the near future. Data centers. Data centers is for us a key market. But to remind you, we are not the fans of the very big projects with hyperscalers. We focus more on medium-sized smaller projects and the overhaul of the existing data centers. And then also the maintenance portion within plays a significant role for us. So this is a key market where we want to grow and emphasize this in all our territories. Which question did I not answer?

No, that's perfect. And Markus, maybe just a follow-up in terms of the approach to kind of contract size and selectivity and now you're kind of Group CEO. And obviously, I appreciate you said you're Gautier's disciple. But in terms of the contract review limits at the group level and the kind of size that you focus on, do you envisage making any changes to that approach, maybe particularly as Europe starts to scale up in some of the larger investment programs that have been spoken about for a while?

Well, first of all, I did not tend to change the rules internally within the first 3 months and rather to make myself familiar and experience. So I had a busy period and reviewed above 90 projects within the first 3 months. Well, this is certainly a ramp-up of our activity, which is good. You directly feel it. But also it brings us the connectivity to the very bottom of our organization to the project managers, you exchange with them regarding terms and conditions, client perception and all such things, which are really worth discussing. But of course, I mean, with the growth of the group and also the managers growing as well in my team, we might take a look at that. But for me, the disciplined approach and the focus of managers in the very first phase of our -- of the lifetime of our projects is a very essential one. This will not change.