SPIE SA (SPIEP.XC) Earnings Call Transcript & Summary

Welcome to the SPIE 2025 Half Year Results Conference Call. [Operator Instructions] Now I will hand the conference over to Gauthier Louette, Chairman and CEO; and Jérôme Vanhove, Group CFO. Please go ahead.

Yes. Good morning, ladies and gentlemen. Thank you for joining us today for H1 results conference call. I'm joined by Jérôme Vanhove, our Group CFO. And I'm also very pleased to welcome Alexandra Bournazel, our new Head of Investor Relations. Our first half results confirm the strength of our model, the relevance of our strategy and the quality of our execution. Energy transition and digital transformation are firmly anchored as lasting growth drivers across our markets, and it does allow us to confidently navigate the current geopolitical and macroeconomic uncertainties. To begin, I would like to share a few recent contract examples that reflect this positive momentum. In Germany, SPIE is delivering the full technical installation for a new 16-megawatt data center in Schwalbach near Frankfurt. Some of the waste heat generated during operation will be recovered and sent directly into the municipality network, creating a highly efficient and sustainable energy cycle. This project also integrates a number of eco-friendly features such as rain water collection for outdoor irrigation, a vegitized facade and an on-site photovoltaic system. The project is designed to achieve a power user effectiveness below 1.2 with 100% system availability. In the Netherlands, we installed 500-kilowatt hour modular battery system to support EV charging at Volvo's headquarters. This solution allows Volvo to store electricity from both solar panels and the grid during off-peak hours and release it when demand is high, effectively addressing grid congestion and ensuring a more reliable charging process. The project includes data collection and smart energy management to support the shift towards the fully gas-free and sustainable energy system and it is a step forward in Volvo's global ambition to reach net zero emissions by 2040. In Poland, SPIE carried out the installation of mechanical and electrical systems in a large industrial complex near Lódz. The project features a unique heating and cooling system with 6 outdoor air source heat pumps, generating 3.6 megawatts of power. This project showcases SPIE ability to deliver demanding installation covering a large scope from industrial gas system to fully integrated building management system with effective collaboration of our specialized subsidiaries in Poland. In France, SPIE Nucléaire signed a contract as part of the consortium to carry out ventilation system study for EPR2 reactors. The contract is part of the plan to build 6 new EPR2, some new generation reactors in France by 2050 to support the country's low-carbon energy strategy. And this contract illustrates SPIE's active contribution to this new program. It is a second contract for SPIE linked with new EPR generation. Now moving to the key H1 highlights on Slide 6. Revenue increased by 5.8% with a solid 2.4% organic growth. EBITA margin stood at 6%, reflecting a new step-up of 40 basis points. Our structurally negative working capital improved over 12 months, highlighting our steadfast focus on financial discipline. As a result, leverage ratio decreased significantly compared to June last year with a historically low H1 seasonal releverage. Bolt-on and M&A activity remains sustained with EUR 96 million in annual revenue acquired, focusing on attractive markets. Finally, these H1 results strengthen our confidence to meet our 2025 targets. We even firm up our margin guidance to at least 7.6%. Taking a closer look at the key figures for H1. Revenue amounted to EUR 4,979 million, up 5.8%. As I said, growth was well balanced between the 3.8% contribution from acquisition and a 2.4% organic growth. EBITA was EUR 301 million. That is another double-digit increase of 13.2% and also a new margin step-up of 40 basis points after the 50 basis points achieved in 2024. Our margin trajectory is extremely solid, and this is a core strength to our value creation model. On the balance sheet side, as I mentioned, leverage was down by 0.5 turn over 12 months to 1.9x EBITDA at the end of June 2025. And now focusing on revenue growth. At constant exchange rates, revenue grew by 5.9% in H1, driven by 2 segments: Germany, which once again delivered very high growth of 15%, well balanced between organic growth at 6.6% and the contribution from acquisition at 8.4%. North-Western Europe, which also performed strongly with revenue up 8.9%, driven by strong organic growth at 8.1%. Meanwhile, France continued to demonstrate good results, with revenue down only slightly by 0.8%. Central Europe grew by 0.9%, driven by a 5% contribution from acquisition, offsetting a minus 4.1% organic decline. Global Services Energy reflected normalization after an exceptional H1 2024, which has benefited from a one-off shutdown maintenance contract. Overall, this performance underscores the strength and balance of our multi-local, multi-technical model, which continues to deliver across the range of geography and market environment. Moving to Slide -- to the margin page. We delivered another step-up of 40 basis points, reaching an outstanding 6% in H1 2025. All segments contributed positively, 40 basis points in Germany and as much as 100 basis points for North-Western Europe. Once again, this margin expansion reflects our unwavering focus on rigorous contract activity, pricing discipline and high-quality execution. It was also supported by a favorable mix effect from very strong growth in Transmission & Distribution Services and by the slightly accretive contribution from some acquisition completed in 2024. So talking of acquisition. In H1, we signed 3 new acquisitions. LTEC in Poland, adding EUR 19 million in annual revenue, strengthening our capabilities in building automation and management systems. SD Fiber in Switzerland, adding EUR 70 million revenue in the fast-growing fiber optic services market. Rovitech in the Netherlands, EUR 7 million revenue, complementing our data center offering in the country. And meanwhile, the integration of all 2024 acquisitions is progressing well and fully in line with our plans. Looking ahead, we maintain a robust pipeline of bolt-on acquisition opportunities, providing good visibility on sustained external growth momentum in a highly fragmented market. Turning to the segment and starting with Germany. With a 15% revenue growth in H1, Germany is now our #1 revenue contributor. High Voltage recorded very high growth, supported by exceptionally favorable project phasing in H1. Technical Facility Management delivered a solid performance with energy efficiency, extremely established as a lasting growth driver. In Building Solutions, the example I shared earlier does illustrate our strong position in data centers, while our Transport Infrastructure business is also a strength. In Industry Services, performance was solid as well, driven by our sector-specific positioning, focused notably on pharmaceutical, wind and LNG projects. EBITA margin increased by 40 basis points to 5.6%. This improvement reflects a favorable mix effect from the strong growth in High Voltage, the accretive impact of acquisition completed in 2024 as well as relentless focus on operational excellence and contract selectivity. In France, revenue was broadly stable in H1, demonstrating strong resilience in a subdued local macroeconomic context. Only 2 divisions saw a decline in H1. City Networks with the ongoing ramp-down of mature fiber optic roll-out activities. Building Solutions, where we kept a high level of selectivity and secured a solid backlog of quality projects. Tech FM continued to benefit from a solid recurring revenue and long-standing relationship with high-quality clients. Industry and ICS both confirms their resilience, thanks to diversified sector exposure and the mission-critical nature of the services they provide. Lastly, Nuclear Services posted a solid performance, supported by strong execution of the maintenance programs. EBITA margin improved by 10 basis points, which clearly demonstrates our lean and flexible our cost structure is. Moving to North-Western Europe. We delivered an outstanding performance, both in terms of revenue growth and EBITA margin improvement. Organic revenue growth was very strong at 8.1%. EBITDA margin increased sharply by 100 basis points, the highest gain across all segments to reach 6.9%. The Netherlands indeed delivered an excellent performance, confirming strong positioning in key markets such as High Voltage, Energy Efficiency for buildings or data center services. In Belgium, High Voltage services are emerging as a key growth driver, supported by a step-up in grid investments from the national TSO and booming demand for battery energy storage systems. Building Solutions and Technical Facility Management also contributed meaningfully to the performance. In Central Europe, revenue grew by 1.6%, entirely driven by a 5% contribution from acquisitions, mainly in Poland. Organic growth was minus 4.1%, but is expected to turn positive in the second half, supported by a high backlog. In Poland, revenue was impacted by delay in project execution High Voltage. That said, the outlook for this activity remains very positive, driven by high energy transition investments. Austria sustained a high level of activity, supported by strong momentum in transport infrastructure as well as in Transmission and Distribution services. Overall, the EBITA margin increased by 30 basis points in H1, reflecting the continued focus on operational excellence and a strong contribution from Austria. And lastly, Global Services Energy's revenue declined by 8.2% due to an exceptionally high comparison basis in H1 2024, which have benefited from a one-off shutdown maintenance projects offshore Nigeria. Business trends were solid in oil & gas maintenance activities. In offshore wind energy, commercial momentum is positive as we are leveraging our expertise and technical capabilities following the integration of Correll Group. EBIT margin increased by 20 basis points to 8.6% in H1 2025. And I will now hand over to Jérôme, who will comment the financial results.

Thank you, Gauthier, and good morning, everyone. Starting with a quick overview of our first half financial performance. We delivered revenue of EUR 4.979 billion, up 5.8%. This performance reflects a healthy level of organic growth, notably in Germany and North-Western Europe and proven resilience in France. External growth accounted for 3.8%, mainly including the contribution from the 2024 acquisitions. EBITA reached EUR 301 million, increasing sharply by 13.2%, underpinned by a 40 basis point margin step up to 6%. The negative net income for this first half of the year due to the impact of our online convertible bond that I will comment later on. I would finally highlight our adjusted net income at EUR 167 million, up 5.7%. Moving to our revenue bridge, which provides for a breakdown of our 5.8% revenue increase. As already pointed out, solid organic growth at plus 2.4%. The M&A contribution from the 2024 acquisitions as well as the ones consolidated for the first time in H1 2025, supporting our revenue growth by plus 3.8%. The limited impact from the disposal at the end of last year of a small Belgian IT support business, which accounts for minus 0.3%. Currency effects were close to neutral over the period. Let me now comment on our adjusted net income for the first semester at EUR 166.6 million, adjusted net income was up 5.7% year-on-year, supported by the strong increase in EBITA. The progression was, however, partly held back by an unfavorable FX gain and loss balance during the period, and this at the level of global service energy that was especially due to the evolution of the U.S. dollar euro parity. Our normative tax rate is kept identical to the one we retained for the full year of 2024 at 29.2%. So solid results overall despite exceptional FX-related impacts. Turning now to our reported net income, which was exceptionally and quite significantly impacted this semester by the noncash accounting loss due to the IFRS treatment of our ORNANE convertible bond. Given the sharp increase in our share price over the period, we recorded in our P&L, a negative fair value adjustment of the -- for the ORNANE of around EUR 160 million. This was mitigated by a EUR 41.9 million deferred tax assets. As a result, our reported net income stood at minus EUR 13.4 million for this first semester. By the way, let me remind you that this ORNANE accounting treatment is particularly of the IFRS, obviously, not considered under U.S. GAAP. Without this ORNANE accounting effect, our reported net income would have amounted to a positive EUR 107 million compared with EUR 57 million last year. Given the significance of this accounting impact, let's delve a bit on this topic. And before we get more technical, 2 major principles you need to have in mind on convertible bonds. One, when it is out of the money, meaning share price is lower than conversion price, the issuer, in our case, SPIE remains liable for the nominal amount of the instrument. As soon as it is in the money, the value of the convertible bond in our balance sheet does increase and this proportionally to the share price. To be more specific, the derivative component of the ORNANE is revalued at fair value at each closing based on SPIE's share price. SPIE's share price rose sharply from EUR 30 at the end of December '24 to EUR 47.7 at the end of June 2025, thus significantly surpassing the EUR 32.43 of the conversion price set for this ORNANE convertible bond and thus leading to a significant increase in the fair value of the derivative instruments, recognized as a liability in our consolidated balance sheet. I remind you once again that this is strictly noncash IFRS accounting entry, remaining noncash at redemption and this at the end of the issuer. In other words, at our hand. As already disclosed at the time of the issuance of this ORNANE, the potential dilution at redemption, assuming mixed redemption in cash and in shares, would be very limited. If we retain 145% premium to the conversion price, meaning the share price of circa EUR 47, the one-off dilution would be limited to 2.3%. Turning to working capital, which remains a structural strength of SPIE's business model. As you know, we consistently operate with structurally negative working capital throughout the year. Compared to last year, we further improved in higher working capital performance with a 10-day reduction from minus 17 days at the end of June 2024 to minus 27 days at the end of June '25. This improvement was observed in all working capital items, of which a very effective work in progress management, which evidences a strong invoicing discipline and cash collection overall. Moving on to free cash flow. The starting point is obviously our growing EBITA by more than 13%. As mentioned, our strong working capital performance translated to a limited cash outflow of EUR 277 million, a significant improvement compared to the first semester of last year. As a result, operating cash flow turned even positive for the first time in H1 and this considering the usual cash flow seasonal pattern of the group. Free cash flow improved accordingly to minus EUR 109 million, to be compared with minus EUR 211 million in the prior year. In line with our commitment to optimizing value to shareholders, we also executed a EUR 39 million anti-dilutive share buyback program in the first quarter at an average price per share of circa EUR 31. Overall, our net debt increased over the first half by EUR 347 million. With our leverage ratio -- moving to the deleveraging page, with our leverage ratio down to 1.9x at June end compared to 2.4x a year ago, we further evidenced the deleveraging power of our cash-generative model. It also marks an exceptionally low H1 seasonal releveraging, only 0.3x compared to December end. Lastly, to conclude my part, a word on our financing structure. In May, we successfully refinanced our 2026 bond with the issuance of a new 5 years, EUR 600 million sustainability-linked bond. It was largely oversubscribed. It carries a fixed coupon of 3.75%, implying a spread below 150 bps, which, by the way, rather belongs to investment-grade issuer category. SPIE's entire debt profile with this new bond is now fully sustainability-linked in line with our midterm ESG targets. 81% of our gross debt is now at fixed rate with a weighted average cost of such debt at 3.4% over the first semester. High liquidity level ensured all along the year with at June end, EUR 1.3 billion, including EUR 295 million in net cash and EUR 1 billion of undrawn credit lines. Our shareholder returns continue to improve, starting with the inaugural EUR 39 million share buyback program as well as the successive dividend payments of EUR 0.75 and EUR 0.30, corresponding to the -- for the first part, the final 2024 dividend payment and to the 2025 interim dividend, respectively. Thank you for your attention. I now hand over to Gauthier.

Thank you, Jérôme. Based on these H1 results, we confirm our full year outlook, and we even firm up our margin guidance. So we expect strong total growth, pushing revenue well above the EUR 10 billion mark, supported by further organic growth and active bolt-on M&A. We now expect an EBITA margin of at least 7.6%. And 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 in case you would have forgotten, let me repeat it once more. It is a very good time to be a European electrical engineer. And with Jérôme, we are now ready to take your questions.

[Operator Instructions] Next question comes from Aleksander Peterc from Bernstein.

I just have 3. The first 1 is on your guidance for 2028 that you issued at the CMD. So the 7.7% margin, I think, if I recall correctly. Is that now going to be achieved early because you need only a very small progress versus what you're going to achieve this year to get to that target? So is that already achievable in 2026? Second question and third question, just very briefly on geographies. Can France improve to year-on-year growth for the year with a stronger second half as the difficult comps wash out? And then Central Europe, again, we had a similar decline there as in Q1. Will that also reverse into stronger growth? And can we end the year in positive territory for Central Europe?

Yes. Thank you. Regarding the guidance for the margin, we mentioned at least 7.7% in 2028. But we have made good progress so far, and we confirm we're going to make good progress for the year. So let's deliver on our guidance for 2025 first and then we'll take it from here. Regarding organic growth in France. Well, it's -- we -- the visibility is not outstanding at the moment. We might improve during H2, but it's not something I would guarantee today. We are reasonably confident for the second half of the year, but we've seen quite significant fluctuation in France. Let's -- the mood is not overenthusiastic at the moment in the business world. Let me stress again that the decline on H1 was solely on the back of our optic fiber business within the City Networks division where we continue to decrease at a slower pace. And then on commercialization, where we have deliberate selectivity on the market where barriers to entry are always a bit lower. We also might benefit from an easier comparison basis for H2 in France. And whereas -- and for Central Europe, well, again, we have a number of High Voltage projects in Poland, usually, we are also responsible for getting the authorization before starting work. And this might prove sometimes a bit difficult to forecast in terms of completion of this task, and this is why we -- it does create fluctuation. The backlog in High Voltage is good in Poland, and we see a constant flow of new core for tenders coming up. So we are confident in that. And altogether, the Building Station business in Central Europe, I mean, it's also a bit under pressure right now. Cutting a long story short, also on the back of very good activity in Austria, we think that we will have a positive H2 in Central Europe.

Next question comes from Remi Grenu from Morgan Stanley.

Three questions, if I may. So the first 1 would be on Germany. So interested in having an update on the potential acceleration of investments from public authorities, if you have been getting any more clarity on the timing and the potential magnitude in the end markets where you think you could benefit from these. So any update versus when we discussed that last at Q1? The second part of the question would be on the overall sentiment of your customer in the private sector in that country as well, if you feel like there is potential to accelerate further from the already quite good organic growth that you're generating in that country. So that first part on Germany. The second is still on that same country. I think that there is a sentence where you're calling a very positive phasing of High Voltage contract responsible for the good organic growth in H1. Any risk that this could reverse in the second half, and we see slower organic growth? So just some clarification on that. And then the last question, probably for Jérôme on working cap improvement. Can you elaborate a little bit on the drivers of that, if there was any one-off or particularly strong cash collection at the end of H1, which could imply a little bit of reversion? Or do you believe that the improvement you've delivered is something that is structural and we are going to continue to see over the next few semesters?

Yes. Thank you, Remi. With regard to investment programs in Germany, as you know, the budget is currently under discussion in Germany. It will be approved to the second -- I mean, towards the end of the year. And this budget reflects the program announced by [indiscernible] . So clearly, there is stronger push towards infrastructure investment towards defense as well. So very much in line with which have been announced back in March. So it does confirm this trends, which are favorable. Does it translate immediately in orders for SPIE? Obviously no, it will take some time. It does create a more positive sentiment for our customers in Germany. That's why, for instance, in technical facilities, we see good trends right now and as well as in the industry. With regard to High Voltage phasing, I think it is important that you mentioned it and that we keep it in mind. Yes, we had a very, very positive, I want to say, very positive. I'm talking double-digit growth in High Voltage in the first half of the year. We don't anticipate to have this kind of very strong growth in the second half. Clearly, these projects are fairly bulky, and you are talking sometimes EUR 40 million, EUR 50 million project. As I mentioned several times, it is with 4 customers. So it is the same contract, the same technology, the same teams. So it is very safe and good pricing. So it is very safe in terms of margin execution and margin delivery, but it does create volatility. And from 1 quarter to the other, depending on when we started the year before, depending on if 1 project is delayed for last minute planning permission hiccups, et cetera, it does create volatility. So we had a very, very strong H1. We don't anticipate this to last for the whole year.

With respect to your question on working capital. Very clearly, no one-off considered in this first half and especially at the end of June. It's basically an improvement across, as I said, all the working capital items constituting it. Basically, what we observed is a very clear improvement in our ability to invoice, so very strong discipline in that respect. Thus, leading to an optimization of the [ WIP ] inside the working cap. I think that trend will sustain an obvious reduction in the working capital swing entire, not necessarily at this stage in favor of an over achievement towards the end of the year. So it's much more the curve entire, which is flattering a bit. We're obviously putting us very confident to achieve once more our 100% cash conversion target for the whole of the year.

Next question comes from Christophe Chaput from ODDO.

Yes, I've got 3 questions as well. The first 1 is a quick follow-up on Central Europe and Poland. You stated a negative impact from the delay execution in High Voltage. Could you give us a rough idea of the impact in million euro? And are you going to catch up in Q3 or Q4? Just seems to say that -- you say that H2 will be positive, but just what kind of magnitude. The second 1 is, could you come back on the margin improvement in H1. I'd like to know if you can share with us the impact of the accretive acquisition on the plus 40 bps. I mean, I calculate it plus 15, but just to have your view and also the impact of the mix effect on the Transmission and Distribution. And the last 1 is on the full year. I totally understand, let's say that you are cautious in France on top line. But would you say as well or nevertheless, that the margin in France for the full year will be at least flat, considering that you see an improvement by 10 bps in H1?

Thank you, Christophe. Regarding High Voltage impact in Central Europe. I'm afraid that I cannot disclose the amount. Again, the trends are favorable, there are fluctuations. It is really part of life in Central Europe, also linked to the nature of the contract, as I mentioned. Regarding margin improvement, we're talking about 10 basis bps for or slightly less than that for the first half of the year for acquisitions. And we expect it to be in the range for the whole year, maybe kicking up slightly with some of the acquisitions where revenue will be stronger in the second half. Impact of mix effect, but difficult to quantify per se. But obviously, as I mentioned, High Voltage bid in Germany or in Netherlands or even in Belgium, these are accretive to the margin. And -- but again, we have a lot of moving parts. We have all our countries progressing in Belgium, it's not only the Energy. We're also progressing well in the Industry. In the Netherlands, we have a very smooth progress for Building Solutions. So I think everybody is playing a role and the mix effect is one of the moving parts. But altogether, I'm really satisfied with the quality of execution and also the discipline on pricing. We still enjoy good pricing power. And I was mentioning in the past that inflation was more a drag and towards our margin improvement. With this inflation, I think it shows that the margin improvement is linked with the quality of execution from bidding to delivering the projects. The full year margin in France, I'm not worried. I think we're able to maintain the progress achieved in H1. Again, a very disciplined team, very seasoned. We have a flexible cost base, and so we're able to adapt rapidly to fluctuations. And we always kept the business lean. So we are as I've mentioned several times, we don't mind to play defense. It's something SPIE is very good at. So no worry at all about the margin in France for the full year.

Next question comes from Rory McKenzie from UBS.

It's Rory here from UBS. I've got 2 questions, please. Firstly, can you talk about in France? You referenced the strong sectors within Building Solutions that are holding up quite well, data centers and defense. What are the markets that are weakest in France at the moment? And could you give us a sense of the relative exposure to those sectors? And also, are you putting staff out permanently and redeploying them within that market? And then secondly, I wanted to ask about pricing power generally. You usually referenced it's still strong, but wage inflation indicators are cooling across many markets. So could you speak specifically about the shortages of electrical engineers that you're facing or the market is facing. And obviously, given that you keep saying it's such a good time to be an electrical engineer, do you think people are being attracted into the market at all at the moment?

That's a very good point, Rory. Thank you for that. It's a very good time to be an electrical engineer. And we deploy a lot of efforts to help people discover the world of electrical engineering. And so we do try to bring people from adjacent markets, adjacent skills to our business and not unsuccessfully. We managed to train people from other areas. And it's something we does help a lot. We also work a lot on the retention. And I always mentioned the very helpful factor of shareholding plans, we do create a strong bond to the company. In fact, we perform on a regular basis satisfaction surveys of our employer, our employees. We have this Great Place to Work certifications, which are increasingly deployed over the business. So it's -- we're working a lot on that and also on competition. So our own employees recommending hiring of people they know, which is a good way to have a mutual understanding of the business. In -- apart from electrical engineers, which are still short supply. It's fair to say that in other areas such as administrative jobs, et cetera, the tension has eased a bit. So it is easier to recruit these qualifications, and then we have more time to focus on the technicians. Regarding market, I think the -- what's weakest in France at the moment is commercialization. It accounts for EUR 0.5 billion of our revenue roughly, which by the way, margins, which are slightly dilutive compared to the average in France. And we do focus on technical installations, technical buildings. Obviously, the run of the mill office block, the run of the mill school or college, it's fairly out of bonds for us at the moment. There are lower barriers to entry and also people moving from the housing sector, which is very subdued at the moment, they try to address this kind of projects. And so that's not what we are focusing at all. But we have nice wins in data centers. We have nice wins in some industrial buildings. And we have also number of carefully selected projects for the health care sector, and that's why how we managed to maintain a decent level of production. But this is clearly the area which is mostly thoughtful at the moment.

Great. And do let us know if you have come up with a program to train research analysts to engineers.

Our next question comes from the line of David Cerdan at Kepler Cheuvreux.

Yes. Good morning. This is David Cerdan from Kepler. I have 2 questions. The first 1 is regarding your backlog or order book. Can you give us the trends regarding order book and backlog per region? And my second question is related to Germany and the EMEA stimulus. Do you think that there is a constraint from the human factor? So in other words, do you think that the stimulus is also constrained by the lack of skilled people to -- for the construction and for the electricity part of the building?

Well, obviously, we do not disclose backlog by region. I'd say let me mention that at SPIE's level, the backlog is very healthy. And obviously, we have a few fluctuations by country, by sector. But altogether, we see a trend which may very reasonable with positive organic evolution of our order intake. Regarding the margin stimulus, I think it is a fair point, but it's not only pertaining to our own resources. It also pertains to the resources at customers and because they need to plan for new projects and they need to organize the funding and issue the call for tenders, et cetera and we see also limitations at that end. And it's often the case that our customers ask us to second people to them to help on the engineering phase. It is also the case that they tend to do less engineering at the end and tell us with the contracts where we are going to do more basis or even sometimes the process engineering. So it also creates opportunities for us. But you are right, you have to see the whole picture, which is it's not only printing the money. It is also creating all the technical documents before you are able to launch a project. However, it -- this is fairly well recognized in Germany right now. And I think people are really looking for reinforcement for the solution also coming from outside of Germany to have them support this investment plan.

I have the last question regarding your exposure to the defense sector, are you exposed to these kind of clients?

Well, at group's level, not surprisingly, our exposure to defense is a bit under 2% of our turnover, which is fairly in line with the GDP spend for -- with the proportion of GDP spend for defense across Europe. And again, not surprisingly, the lion's share is in France, where we work a lot for all branches of the Army, and we do maintenance of nuclear submarines. We do maintenance on air base. We work on logistics centers of the army, et cetera, but we also do maintenance of [ barracks ] or data center for the Dutch Amy. And last year, we gained a contract for overall of naval base in Northern Germany. So it is -- and that's for the defense ministries, but we also work for the industrial companies in defense, and we do maintenance for Dassault plants in France. We work for Thales, for Airbus. We maintain the helicopter factory in close to [ Marcela ]. Yes, we have good exposure and a good knowledge of the processes. In Poland, we are also qualified as a special qualification to work for the Polish Army, which we own. And we have all the processes in place for those contracts we need to have a special qualification like [indiscernible] in France and equivalent certification in other countries.

[Operator Instructions] Next question comes from Laurent Gelebart from BNP Exane.

So I have 2 questions. The first 1 relates to your pipeline of bolt-on ahead. So could we expect acceleration in terms of M&A into H2? And the second 1 is a technical one on the [indiscernible] for Jérôme. So could you confirm that when you will repay your bond, you would repay it in cash to EUR 400 million?

So regarding M&A, we are constantly working on the strong pipeline. And clearly, we have a number of deals cooking right now. So let's hope that they come to fruition in various geographies. So yes, we expect further sustained M&A activity for the second half of the year as usual.

Regarding the ORNANE, Laurent, the specificity of the ORNANE type of convertible bonds, especially to provide for the issuer the optionality to redeem in cash and/or in shares. I do confirm that the base case at SPIE so far, it's definitely to redeem in cash. The principal amount, so EUR 400 million and to consider issuance of new shares for the complementary part thus the very limited dilution that we have already articulated, 2.3%, for instance, if we retain a share price at EUR 47 at the time of redemption and then you can make a linear extrapolation starting from there.

And we will have a follow-up question from the line of Remi Grenu at Morgan Stanley.

Yes, it's me again. Just 1 follow-up question, which relates to what David was discussing on the backlog. I guess one of the key reasons for margin acceleration has been an evolution in the mix over the last few quarters. So can you give us a little bit insight from what you're seeing in that backlog momentum of activity. Do you think that the pace of margin improvement you're getting from that evolution is mixed something that can be sustained over the midterm? Or have we seen over the last few quarters, there is a bit of an exceptional situation where it was firing on all cylinders within activities where the margin is supportive and a little bit subdued activity in lower margin part of the business. So I just want to have your view on whether that improvement in margin coming from mix is you think, sustainable?

Well, obviously, the pace of increase over recently were 50 basis points last year and the 40 basis points this year, at least. So obviously, it's a strong pace. So we cannot guarantee we're going to increase 50 basis points every year. That's -- however, we think we're not at the end of [indiscernible] . We're quite able to further progress. There is a mix effect you have mentioned is the contribution from acquisition, and I think it will be a bit stronger in the second half of the year compared to the first one. And the constant focus everywhere. In the market was the demand in a number of sectors remain strong. And the customers are aware of the scarcity of good resources of well-trained people. So I'm confident going forward that we're able to maintain further margin increase, but I would not commit to this kind of step-up every year, obviously.

And we now have a follow-up question from David Cerdan at Kepler Cheuvreux.

Yes. A follow-up question regarding your M&A. Do you have the plan to open some new geographies, new countries in Europe?

It is not a plan right now, but we do not rule it out for the future. Again, we still have a lot to do in our existing geographies. And I keep mentioning how Germany is important to us that we still have -- we are #2 in Germany with a market share of roughly 4%. That is a very good country to be in, and it's going to get even better by the look of it. So it's clearly our priority going forward. We have also countries like Poland, where there's quite a bit to do. Poland, it's 80% of the GDP of the Netherlands as an example. And these are countries where the indebtedness is reasonable. It's roughly in the range of 50% of the GDP, give or take. It's the same for the Netherlands as well, by the way. So we can expect a good pattern of the economy going forward. And I think it is worth reinforcing our position in these countries. Having said that, we do not rule out at some stage to expand our geographical footprint. There are no concrete plans as we speak.

There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks.

Thank you very much for your attendance today. Thank you for the interest you take in SPIE, and you can rest assured that we are going to work very hard on delivering on our promises. And do not forget, it's a good time to be an electrical engineer. Thanks a lot. Have a good day.