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27/07/2018
Press release
2018 Half-Year results - Solid performance, full-year outlook confirmed

Cergy, July 27th, 2018


H1 2018 highlights


- A solid performance in H1, in line with expectations

. Total revenue growth at constant FX: +16.0%
. Strong organic growth, at +3.4%
. Bolt-on acquisitions on track: 3 companies acquired to date, totalling €85 m full-year revenue
. Group EBITA margin: 4.8%, slightly up compared to H1 2017 pro forma (4.7%)


- Major corporate projects completed, ready to drive future performance

. France: reorganisation into market-focused divisions completed
. Germany: new organisation up and running, with T&D Services activities fully integrated.


- Full-year outlook confirmed

Upon the presentation of the 2018 half-year financial information, Gauthier Louette, Chairman & CEO, declared: ‘SPIE’s solid performance in the first half of the year confirms the renewed momentum observed in most of our geographies. France and Germany are the driving forces of this performance, with healthy organic growth and good margin trajectories. We are delivering on our long-standing bolt-on acquisitions strategy, with three companies acquired in 2018 so far, and cash generation remains a key area of focus. We are confident for the balance of 2018 and confirm our guidance.

H1 2018 financial headlines

[1] Including all acquisitions made in 2017 as if they had been consolidated starting in January 1st, 2017
[2] Restated in accordance with IFRS 5, consistently with FY17 published figures (refer to 2018 interim financial statements)

Consolidated revenue was €3,109.0 million in H1 2018, up +15.2% compared to H1 2017R on the back of a +3.4% organic growth and of the full-year consolidation of 2017 acquisitions. Foreign exchange impact was -0.8%, reflecting the strengthening of the Euro against the USD, the GBP and the CHF.

EBITA was €149.6 million in H1 2018, up +4.7% compared to H1 2017 pro forma1 and in line with H1 2017R. EBITA margin was 4.8%, slightly up compared to H1 2017 pro forma level of 4.7%. As a result of the first full-year consolidation of SPIE SAG and Ziut, it was down compared to H1 2017R (5.5%) as both companies have strongly seasonal activities.

Net income (group share) was €(17.5) million in H1 2018, impacted by one-off costs linked to the disposal of Distribution services activities in the UK and a negative performance from the discontinued SAG Gas & Offshore activities. Adjusted for non-recurring costs and allocated goodwill amortisation, Adjusted net income (group share) was €71.0 million.

Net debt increased in the first half of 2018, as expected, to €(1,996.7) million at June 30th, 2018. Leverage[3] was 4.3x at June 30th, 2018, compared to 3.3x at December 31st, 2017 due to working capital seasonality, which will fully reverse in the second half of the year. Our full-year 100% cash conversion target will result in a reduced year-end leverage, at 3.1x.

[3] Net debt / pro-forma EBITDA on a trailing twelve-month basis

Analysis by segment

[1] Restated in accordance with IFRS 5, consistently with FY17 published figures (refer to 2018 interim financial statements)
[2] Including all acquisitions made in 2017 as if they had been consolidated starting in January 1st, 2017

France: a new organisation to enhance future performance

The France segment revenue grew +7.8% in H1 2018. In a well oriented market, France recorded organic revenue growth of +2.3%, moderating from Q1 as expected. Activity with industrial customers was good and telecom infrastructure services, both fixed and mobile, saw strong and sustained growth. In the commercial sector, maintenance activities recorded better momentum, while contract selectivity in installation activities, which remained very competitive, impacted Q2 organic growth.

The EBITA margin of 5.7% was in line with H1 2017 pro forma level, as operational improvements compensated, as anticipated, for the decrease in CICE[1].

On July 1st, 2018, SPIE France completed the set-up of its new organisation based on five market-focused divisions. It will enhance SPIE’s future growth and profit in France through the better sharing of innovations and specific areas of expertise. It will therefore enable SPIE to provide integrated solutions with consistent high-end service to each of its strategic markets in France.

In the second half of the year, SPIE expects a further underlying margin increase, driven by an uptick in fiber-to-the-home activities margins, as well as mix improvement resulting from higher contract selectivity in commercial installation.

Germany & Central Europe: strong delivery, successful integration of SPIE SAG

The Germany & Central Europe segment’s revenue increased by +36.5% in H1 2018, primarily reflecting the full-year consolidation of SPIE SAG and Lück. Organic growth was strong, at +7.2%. EBITA margin was 4.2%, strongly up compared to H1 2017 pro forma level of 3.0%.

In Germany, organic growth stood at +5.3%, with good customer activity in all divisions, particularly in High Voltage and Building Technology activities. Continued progress in EBITA margin (compared to H1 2017 pro forma) resulted from the ramp up of cost synergies as well as improved operational performance. Reflecting the Group’s strong development and quality of delivery, SPIE was ranked number one facility services company in Germany in the 2018 Lünendonk study.

The acquisition of SPIE SAG is proving very successful, with Transmission & Distribution Services activities now fully integrated, delivering a strong performance and facing good medium-term prospects.

Their complementarity with our historical service portfolio is already evidenced by the first commercial synergies delivered in the E-mobility and Smart city markets.

The disposal process of SAG Gas & Offshore activities is ongoing.

In Central Europe, revenue growth was good, particularly in Transmission & Distribution Services. In Switzerland, margins made further progress, benefitting from contract selectivity and from the better-performing organisation implemented in 2017.

[1] Crédit d’Impôt pour la Compétitivité et l’Emploi

North-Western Europe: double digit growth driven by acquisitions and organic

Revenue in the North-Western Europe segment grew by +13.2% in H1 2018, including a +10.7% contribution from bolt-on acquisitions and a +3.4% organic growth. EBITA margin was 2.4%, slightly down compared to H1 2017 pro forma level of 2.7%.

In the Netherlands, activity is gaining momentum after a slow start to the year, with strong order intake and good prospects across the board. The turnaround of Ziut is a key area of focus; the company is however at the forefront of Smart city innovation, having won the 2018 Dutch IoT award, for its Internet of Things solution for public lighting management.

In the UK, revenue held up well in the second quarter, supported by Data Center contracts, however margins remained under pressure. In June 2018, SPIE UK completed the disposal of its Distribution activities (underground and overhead).

In Belgium, revenue grew strongly in H1 2018, on the back of very dynamic market trends. The acquisition of ICT specialist Systemat was completed on April 27th and the integration process started immediately. EBITA margin was solid although lower than in H1 2017 due to a slow start in nuclear maintenance activities.

Oil & Gas and Nuclear: encouraging signs

The Oil & Gas and Nuclear segment contracted by -10.5%, a combination of a -5.9% organic decline and a -4.6% negative foreign exchange impact. EBITA margin was 8.0%, compared to 8.8% in the same period of 2017.

In Oil & Gas Services, organic revenue contraction moderated in the second quarter, while margins remained under pressure as anticipated. Recent tendering activity and the continued development in downstream activities provide encouraging signs that activity levels are bottoming out.

SPIE's Nuclear activities reported a mid-single digit organic contraction, reflecting the anticipated EPR contract ramp down, and solid margins. The second half of the year should benefit from an increase in Grand Carénage activity and from the Group’s strengthened position in general electrical installations.

Bolt-on M&A

Since the beginning of 2018, SPIE has completed 3 acquisitions totalling approximately €85 million of full-year revenue:

  • On April 27th, 2018, SPIE completed the acquisition of Systemat in Belgium. Systemat specialises in the management of ICT equipment, software and infrastructure for its clients. The company employs around 150 people and forecasts revenue of approximately €70 million for the current fiscal year. This acquisition allows SPIE to enter the Information and Communication Technology (ICT) services market in Belgium and to complement the wide range of services already offered by the Group in this country.
  • On May 23rd, 2018, SPIE acquired Fluigetec in France. This acquisition allows SPIE to complement the wide range of services it offers to the nuclear sector. Fluigetec employs 19 people and generated revenue of close to €2 million in 2017.
  • On July 12th, 2018, SPIE acquired Buchet in France, a company specialising in electrical installation in the Provence-Alpes-Côte d’Azur region. Buchet employs 47 people and generated revenue of approximately €13 million in 2017.

Financing – Balance sheet

In June 2018, SPIE finalised the refinancing of its bank debt through two new facilities: a term loan of €1,200 million and a revolving credit facility of €600 million, both with extended maturity (2023 vs. 2020 for previous facilities) and lower cost (EURIBOR[1] plus an opening margin of 1.70% for the term loan and 1.30% for the revolving credit facility).

On July 19th, 2018, SPIE announced the success of its new employee shareholding plan, Share For You 2018. This operation was a new opportunity for SPIE’s employees to become shareholders on preferential terms, and to participate in the Group’s performance and development. The offer was subscribed by over 6,000 employees and 1,471,793 new shares were issued on July 20th, 2018, raising €21 million. Employee shareholding, through the various Share For You plans, consequently amounts to 4.4% of SPIE’s share capital. In October 2017, SPIE joined the FAS IAS index, which brings together 32 French companies identified as the most advanced in terms of employee shareholding.

The Group’s liquidity remained high, at €691 million at June 30th, 2018 (including €361 million net cash and €330 million of undrawn Revolving Credit Facility).

2018 full-year outlook confirmed

SPIE expects strong revenue growth in 2018:

  • Acquisitions made in 2017 are expected to bring additional incremental revenue in 2018 in the order of €370 million;
  • Group organic growth is expected to improve compared to 2017;
  • Full-year revenue acquired in 2018 through bolt-on acquisitions is expected to be c. €200 million.

As a result, Group revenue is expected to grow in excess of 7.0% at constant currency in 2018.

Group EBITA margin is expected to be 6.0% or more, higher than 2017 pro forma level[2].

Cash conversion is expected to be c.100%.

The dividend pay-out ratio will be c.40% of Adjusted Net Income[3] attributable to the Group.

[1] Or any other applicable base rate
[2] Including all acquisitions made in 2017 as if they had been consolidated starting in January 1st, 2017, 2017 pro forma EBITA margin would have been 5.9%.
[3] Adjusted for the amortisation of allocated goodwill and exceptional items

Consolidated financial statements

The consolidated financial statements of SPIE SA as of and for the six months ended June 30th, 2018 have been authorised for issue by the Board of Directors on July 26th, 2018.

Auditors’ review of the consolidated financial statements is complete and the statutory auditors’ report on the 2018 half year financial information has been issued.

The consolidated financial statements (full financial statements and notes) and the slide presentation of the 2018 half-year results are available on our website www.spie.com, in the “Finance/Regulated Information” section.

Conference call for investors and analysts

Date: Friday, July 27th, 2018 - 9.00 am Paris time - 8.00 am London time

Speakers:
Gauthier Louette, Chairman & CEO
Denis Chêne, Group CFO

Disclaimer

Certain information included in this press release are not historical facts but are forward-looking statements. These forward-looking statements are based on current beliefs, expectations and assumptions, including, without limitation, assumptions regarding present and future business strategies (including the successful integration of SAG) and the environment in which SPIE operates, and involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements, or industry results or other events, to be materially different from those expressed or implied by these forward-looking statements.

Forward-looking statements speak only as of the date of this press release and SPIE expressly disclaims any obligation or undertaking to release any update or revisions to any forward-looking statements included in this press release to reflect any change in expectations or any change in events, conditions or circumstances on which these forward-looking statements are based. Such forward- looking statements are for illustrative purposes only. Forward-looking information and statements are not guarantees of future performances and are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of SPIE. Actual results could differ materially from those expressed in, or implied or projected by, forward-looking information and statements. These risks and uncertainties include those discussed or identified under Chapter 4 “Risk factors” in the 2017 Registration Document, which received the AMF visa n° R. 18 - 023 on April 26th, 2018, and is available on the website of the Company (www.spie.com) and of the AMF (www.amf-france.org).

This press release includes only summary information and does not purport to be comprehensive. No reliance should be placed on the accuracy or completeness of the information or opinions contained in this press release.

This press release includes pro forma financial information in relation to the financial year ended December 31st, 2017, which has been prepared as if all acquisitions made by SPIE in 2017 (including SAG) had been completed as of January 1st, 2017. This pro forma financial information is provided for information purposes only and does not represent the results that would have been achieved if these acquisitions had actually been completed on such date.

This press release does not contain or constitute an offer of securities for sale or an invitation or inducement to invest in securities in France, the United States or any other jurisdiction

contacts

SPIE

Pascal Omnès
Group Communications Director
Tel. : +33 (0)1 34 41 81 11
e-mail : pascal.omnes@spie.com

Thomas Guillois
Investor Relations Director
Tel. : +33 (0)1 34 41 80 72
e-mail : thomas.guillois@spie.com

Brunswick

Agnès Catineau
Tél. : +33 (0)1 53 96 83 84
e-mail : acatineau@brunswickgroup.com