2016 full-year results - Another year of strong delivery of the SPIE model

⁽¹⁾ Restated in accordance with IFRS 5 (refer to notes to 2016 interim consolidated financial statements for further details).

France

In the France segment, margins were maintained at their best-in-class level, through a challenging economic environment. We continued to enforce strict contract selectivity, focusing on profitable and low-risk business, and to optimise our highly flexible cost base. The acquisition in April 2016 of the RDI Group complemented our ICT offering and mitigated a -2.4% organic revenue contraction. We saw better trends in markets such as Telecoms, Food, Pharmaceutical, Aeronautics or Retail, while the Commercial market remained competitive. Our activity with the public sector (25% of the France revenue in 2016) stabilised, after a significant decline in 2015.

As part of the ‘Ambition 2020’ plan, aimed at sharpening our France segment’s organisation to anticipate market evolutions and better capitalise on future growth opportunities, the creation of SPIE Facilities and SPIE CityNetworks was finalised in January 2017, as planned. SPIE CityNetworks regroups our Infrastructure and Telecom services activities and SPIE Facilities our Technical Facility Management activities. These two pure players will foster innovation, particularly in the areas of predictive maintenance and service digitalisation. Alongside SPIE ICS and our five historical regional subsidiaries, now fully dedicated to the industrial, tertiary and transport markets, they will constitute a better-focused organisation, combining the strengths of our nationwide and pan-European offerings with an optimal local proximity.

Germany & Central Europe

The Germany & Central Europe segment reported a strong +26.0% increase in EBITA. EBITA margin progressed significantly, at 4.9% (4.0% in 2015) and revenue was up +3.9%, thanks to a good contribution from recent acquisitions, notably GfT and Comnet in the field of ICT. Organic growth was -3.4%, due to the one-off impacts of having exited dilutive legacy contracts in Germany in 2015, and restructuring our operations in Switzerland.

In Germany, EBITA margin grew by 100 bps, exceeding 5% well ahead of plan, and we completed our 6th bolt-on acquisition since 2013. The roll out of the SPIE model has been a success and our platform is well-poised for the next major step in its development, the integration of SAG.

In Switzerland, 2016 performance was impacted by the restructuring process initiated in 2015, with double-digit declines in both revenue and EBITA. However, EBITA margin started to recover in the 3rd and the 4th quarters, as expected.

North-Western Europe

EBITA in the North-Western Europe segment grew significantly, by +11.6%. Revenue was up +5.5%, despite a -3.8% negative foreign exchange impact due to the weakening of the GBP. Acquisitions contributed +7.1%, while organic growth was +2.2%. EBITA margin increased to 4.9% (4.6% in 2015), with progresses in all 3 major geographies.

After a weak first half of 2016, impacted by delayed decision-making from certain customers around the Brexit referendum, our UK business posted strong organic growth in the second half of the year, benefitting from a well-diversified customer base and activity portfolio, while EBITA margin made further progress.

Trends were good in the Netherlands and Belgium, with both countries growing through acquisitions and organically, and reporting margin increases.

 

Oil & Gas and Nuclear

The Oil & Gas and Nuclear segment recorded a -18.8% decrease in EBITA. Revenue was down -25.7% in 2016 (-24.6% at constant currency). EBITA margin was 10.6% (9.7% in 2015).

In our Oil & Gas activities, customer activity was strongly impacted by the sharp fall in oil prices at the beginning of the year, and remained subdued throughout the year. Our service activities were down -24.0% at constant currency, while we were able to protect our margins through careful contract renegotiation, active management of our flexible cost base, and successful diversification in downstream activities. Volumes in our OCTG⁽¹⁾ activity fell sharply (-89%) with, however, a positive mix effect in terms of margin.

Our Nuclear business reported growth in revenue and EBITA, supported by a peak level of activity related to the ‘Grand Carénage’ programme, which aims at extending the life of French nuclear reactors.

A record year for bolt-on M&A activity

In 2016, SPIE acquired 10 companies, with total annualised revenue of €263 million, the highest in 10 years and above the €200 million guidance. 2016 bolt-on acquisitions were primarily focused on the North-Western Europe and Germany & Central Europe segments, where SPIE further increased its network density (e.g. Trios Group in the UK, Alewijnse in the Netherlands), strengthened its ICT capabilities (Comnet and GfT in Germany), reinforced its position in certain markets (e.g. the Dutch retail installation market with Aaftink, the UK food, beverage and pharmaceutical markets with Environmental Engineering), and expanded the range of its services (e.g. fire protection and security in Central Europe with Agis).

The aggregate EBITA multiple for these transactions was 5.2x, before synergies.

Acquisition of SAG: a major step forward in SPIE’s strategic development

On December 23rd 2016, SPIE signed an agreement for the acquisition of SAG, the German leader in energy infrastructure services, which employs approximately 8,000 people and reported revenue of €1.3 billion and EBITA of c. €77 million in 2016⁽²⁾. This acquisition constitutes a major step forward in SPIE’s strategic development, as it will significantly enhance the Group’s presence in Germany and Central Europe, and strongly increase its exposure to attractive Transmission & Distribution markets.

The transaction consideration is approximately €850 million, including a net cash consideration of €460 million and a post-tax net pension liability of €390 million. Based on a 9-month contribution (subject to final closing date, expected in March 2017) and including synergies, the accretive impact on SPIE’s 2017 adjusted net income should be c. 10%, consistent with the information provided in December 2016.

⁽¹⁾ Oil country tubular goods
⁽²⁾ Based on information provided by SAG. Revenue and EBITA presented are restated from non-recurring items and changes in scope of consolidation.

Financing – Balance sheet

Cash conversion was outstanding, at 122%, reflecting the quality of our earnings, and sustained progress in the implementation of SPIE’s working capital management processes across our most recent geographies.

Net debt at December 31st, 2016 was €909 million, compared to €999 million at December 31st, 2015, pro forma for the deconsolidation of our OCTG activity as at January 1st, 2016 (€924 million as reported) and net leverage decreased to 2.3x, from 2.6x at the end of 2015 on a pro forma basis.

Following the signing of the acquisition of SAG, SPIE’s long term corporate credit rating was confirmed by both Moody’s and Standard & Poor’s, at Ba3 and BB, respectively⁽¹⁾.

The financing of the SAG acquisition is secured by a fully committed bridge facility, which was undrawn as at December 31st, 2016. SPIE intends to refinance this facility by way of a bonds issue that would be launched shortly, subject to market conditions.

⁽¹⁾ Outlook changed from positive to stable by Standard & Poor’s

2017 outlook

Based on our strong pipeline, revenue acquired in 2017, through new bolt-on acquisitions, should again be in the order of €200 million on a full-year basis.

In 2017, excluding SAG:

• Group revenue is expected to grow by c. 4% at constant foreign exchange;
• Group EBITA margin is expected to remain stable at its excellent 2016 level.

In addition, SAG’s revenue contribution over nine months (subject to the transaction final closing date) should be c.€1.0 bn, with an EBITA margin around c.6%, including synergies.

Based on the proven track records of both SPIE and SAG, we are confident that the combined Group will achieve c.100% cash conversion.

Dividend pay-out ratio will remain at c.40% of adjusted net income attributable to the Group. In addition, the Board of Directors intends to pay an interim cash dividend in 2017, amounting to 30% of the approved dividend for 2016.

Consolidated financial statements

The consolidated financial statements of the SPIE Group as of and for the year ended December 31st, 2016 have been approved by the Board of Directors on March 9th, 2017. Audit procedures on the consolidated financial statements are complete and the audit report has been issued.

The audited consolidated financial statements (full financial statements and notes) and the slide presentation of the 2016 consolidated annual results are available on our website www.spie.com, in the “Finance/Regulated Information” section.

Conference call for investors and analysts

Date: Friday, March 10^th, 2017 - 9.00 am Paris time - 8.00 am London time

Speakers: Gauthier Louette, Chairman & CEO - Denis Chêne, 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 2015 Registration Document, which received the AMF visa n° R. 16 - 0030 on April 28th, 2016, 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.

The historical figures related to SAG included in this press release have been provided to SPIE by SAG within the context of the acquisition process. These historical figures have not been audited or subject to a limited review by the auditors of SPIE.

This press release includes pro forma financial information in relation to the financial year ended December 31st, 2016, which has been prepared as if the acquisition of SAG by SPIE had been completed as of January 1st, 2016. This pro forma financial information is provided for information purposes only and does not represent the results that would have been achieved if this acquisition 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.