2018 full-year results

- Solid results
  - Total revenue growth at constant FX: +9.2% with organic growth at +2.6% and +3.0% in Q4
  - Group EBITA margin: 6.0%, up compared to 2017 pro forma (5.9%)
 

- Sharp increase in free cash flow, deleveraging target exceeded
  - Free cash flow up +23%, at €288 million including restructuring and discontinued operations
  - Net debt reduced by €183 million, at €1,349 million; leverage⁽¹⁾ at 3.0x
 

- Successfully completed major reorganisations
 

- Continued bolt-on M&A: 5 acquisitions in 2018, totalling €95 million full-year revenue
 

- Recommended dividend: €0.58 per share⁽²⁾, up +3.6% compared to 2017
 

- 2019 outlook
  - Revenue growth: 2.5% to 4.5%, including bolt-on acquisitions, at constant currency
  - EBITA margin: at least 6.0%
  - Cash conversion around 100%, continued reduction in leverage
 

^{(1) Ratio of net debt at end December to pro forma EBITDA for the full year
(2) Subject to shareholders approval at the next Annual General Meeting on May 24th, 2019}

Gauthier Louette, Chairman & CEO, commented: ‘In 2018, SPIE delivered on its commitments, with solid revenue growth and strong deleveraging thanks to a very good cash generation. We sharpened SPIE’s organisation for the future: we created a German leader in multi-technical services with the full integration of SPIE SAG, we transformed our French business into market-focused divisions and we exited non core activities in the UK and in Germany. We enter 2019 in very good shape and, thanks to the recognised skills of our 46,400 employees, our highly cash-generative model will fully benefit from the robust drivers of the energy transition and the convergence of technical and digital services.’

^{(1) Including all acquisitions made in 2017 as if they had been consolidated starting in January 1st, 2017
(2) Ratio of net debt at end December to pro forma EBITDA for the full year
(3) Subject to shareholders approval at the next Annual General Meeting on May 24th, 2019}

Group revenue was €6,671.3 million in 2018, up +8.9% compared to 2017, including a +2.6% organic growth, a +7.0% growth from acquisitions, a -0.3% impact from disposals and a -0.3% impact from currency movements. In the fourth quarter of 2018, Group revenue grew +3.9%, including a +3.0% organic growth.

Group EBITA was €400.0 million, up +3.1% compared to 2017 (+4.2% compared to the pro forma1 level of 2017). EBITA margin was 6.0%, slightly up compared to the 2017 pro forma level of 5.9%.

Adjusted net income group share (before amortisation of allocated goodwill and exceptional items) amounted to €216.2 million, up +1.8% compared to 2017, with fully diluted adjusted earnings per share at €1.38, up +1.0% (€1.39 non diluted, up +0.9%).

Net income group share was €91.4 million, including one-off costs associated to restructuring for €(32.3) million pre tax, as well as a €(70.6) million net loss from discontinued operations, primarily stemming from Distribution services activities in the UK, disposed in June 2018, and German offshore cabling activities, disposed in December 2018.

Free cash flow including restructuring and discontinued operations was €288.3 million, up +23% compared to 2017. An excellent working capital inflow resulted in a 116% cash conversion of EBITA. Net debt at December 31st, 2018 was €1,349.1 million, down €182.8 million over 12 months. Leverage⁽¹⁾ was 3.0x at December 31st, 2018, compared to 3.3x at December 31st, 2017.

A dividend of €0.58 per share, representing a 3.6% increase on 2017, will be proposed to the Annual General Meeting of Shareholders on May 24th, 2019. Since an interim dividend of €0.17 per share was paid in September 2018, the final dividend payment on May 31st, 2019 (ex date: May 29th, 2019) will be €0.41 per share if approved. The Board of Directors intends to pay an interim cash dividend in September 2019, amounting to 30% of the approved dividend for 2018.

^{(1) Ratio of net debt at end December to pro forma EBITDA for the full year}

Analysis by segment

^{(1) Disposal of SPIE’s UK overhead lines services business, completed in June 2018. Consolidated for the whole of 2017 and only until June in 2018
(2) Including all acquisitions made in 2017 as if they had been consolidated starting in January 1st, 2017}

France: reorganisation completed, strong and sustainable performance

The France segment revenue grew +4.8% in 2018, including a +3.9% contribution from acquisitions, and a +1.0% organic growth.

Activity levels were good in telecom infrastructure, industry and information and communication services, while SPIE actively reduced, through contract selectivity, its exposure to a very competitive commercial installation market. Organic growth excluding commercial installation was +2.7%. Growth from acquisition was dynamic, with the successful integration of SPIE SAG French activities and ICT specialist S-Cube, as well as two further bolt-on acquisitions completed in 2018, enriching SPIE France’s service offering and footprint density.

On July 1^st, 2018, SPIE successfully completed an ambitious reorganisation of its French segment into five market-focused divisions, with a view to enhance commercial and operational performance through the better sharing of innovations and specific areas of expertise. It enables SPIE to provide integrated solutions with consistent high-end service to each of its strategic markets in France, as illustrated by the launch of ‘Smart FM 360’, a unified digital platform for technical facility management.

EBITA margin was 6.3%, increasing slightly compared to 2017 pro forma level of 6.2%. The decrease in CICE⁽¹⁾ was more than offset by an improved operational performance across most divisions reflecting the efficiency gained from the new organisation.

^{(1) Crédit d'Impôt pour la Compétitivité et l'Emploi}

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

The Germany & Central Europe segment’s revenue grew by +14.4% in 2018, primarily reflecting the full-year consolidation of SPIE SAG and Lück, acquired in 2017. Organic growth was strong, at +4.2%. EBITA margin was 6.2% and grew markedly compared to 2017 pro forma level of 5.5%.

In Germany, SPIE benefits from leadership positions in both Technical Facility Management and Transmission & Distribution Services, on markets where demand for technical services has continued to grow steadily in 2018. Organic growth was strong, at +4.0%. With the integration of SPIE SAG successfully completed and the disposal of German offshore cabling activities signed in December 2018, SPIE is now fully focused on performing, innovating and pursuing further growth in Germany. EBITA margin was 6.6%, significantly higher than 2017 pro forma level of 5.8%, on the back of the full delivery of the €20 million cost synergies ahead of plan, as well as a solid operational performance.

In Central Europe, revenue grew strongly, driven by Transmission & Distribution Services. In Switzerland, SPIE continued to apply strict contract selectivity, with a positive impact on margins.

North-Western Europe: robust growth from acquisitions and organic

Revenue in the North-Western Europe segment grew by +12.1% in 2018, including a +8.7% contribution from bolt-on acquisitions (net of disposals), a +3.7% organic growth and a -0.4% impact from currency movements. EBITA margin was 3.6%, compared to a 2017 pro forma level of 3.7%.

In the Netherlands, revenue grew substantially thanks to acquisitions and a robust organic growth. Business momentum was very positive in Energy, with a stream of contracts stemming from energy transition investments, and in Industry. The turnaround of Ziut, a Dutch specialist in Smart City solutions acquired in 2017, is in progress.

Our UK business, which accounted for 6% of the Group’s 2018 consolidated revenue, proved very resilient in an uncertain environment and reported a modest positive organic growth, supported by Data Center contracts, while EBITA margin progressed compared to 2017. Non-core distribution activities were fully exited in June 2018.

Activity in Belgium was very dynamic across most divisions and EBITA margin was solid although below 2017 level due to weak nuclear maintenance activities. SPIE Belgium’s new Information and Communication Services division, created following the acquisition of Systemat in April 2018, is already addressing the convergence of technical and digital services for the Belgian market. The division has developped ‘Colligo’, a new shared platform which collects, manages and correlates customers’ technical data in order to improve services.

Oil & Gas and Nuclear: Oil & Gas Services back to growth

In Oil & Gas Services, after a positive third quarter of 2018, organic growth accelerated in the fourth quarter, at +8.1%, resulting in slight organic growth over the full year. Growth in the second half was primarily driven by upstream maintenance activities in West Africa, where SPIE leveraged its strong positions to win contracts in a market showing some improvement. Downstream activities in the Middle East remained robust. EBITA margin was better than anticipated, benefitting from efficient cost management.

In Nuclear Services, Grand Carénage activity was strong in 2018 and the Flamanville EPR contract generated more activity than planned. In September 2018, SPIE Nucléaire and SPIE Facilities combined their expertise to win a four-year contract for the multi-technical maintenance of the ITER site in Cadarache, France, offering a comprehensive maintenance solution for all equipment and buildings on the site.

In total, the Oil & Gas and Nuclear segment grew organically by +0.4% in 2018 and growth from acquisitions was +0.4%. The negative impact from currency movements resulted in a -1.1% overall revenue contraction. EBITA margin was 9.5%, compared to 9.9% in 2017.

Continued focus on bolt-on acquisitions

In 2018, SPIE completed five acquisitions totalling approximately €95 million of full-year revenue:

• On April 27^th, 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 generated revenue of approximately €70 million in 2017. This acquisition allowed 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 23^rd, 2018, SPIE acquired Fluigetec in France. This acquisition allowed 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 12^th, 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.
• On August 1^st, 2018, SPIE acquired Siétar & VTI in France, a company specialising in pipework and boilermaking for liquid processes in the agri-food industry. Siétar & VTI employs 44 people and generated revenue of €6 million in 2017.
• On November 6^th, 2018, SPIE acquired FLM Freileitungsmontagen GmbH (‘FLM’) in Austria, a company mainly active in Germany in the fields of overhead power line installation and switchgear engineering services. FLM employs 44 people and generates revenue of approximately €4 million.

The aggregate EBITA multiple for these transactions was 6.9x⁽¹⁾.

Positioned on markets that remain highly fragmented, SPIE will benefit, in 2019, from a strong pipeline of bolt-on acquisitions opportunities.

^{(1) Before synergies and impact of working capital improvement}

Balance sheet: deleveraging target exceeded

Free cash flow and net debt

Operating cash flow stood at €462.4 million in 2018, translating into a 116% cash conversion of EBITA. In line with our usual seasonality pattern, the first-half working capital outflow was fully reversed in the second half of the year. This strong performance reflects the quality of SPIE’s earnings and the constant focus that we have, across the Group, on strict working capital management.

Free cash flow stood at €288.3 million, up +23% compared to 2017, including a €(57.1) million outflow from restructuring and discontinued operations.

Net debt at December 31^st, 2018 was €1,349.1 million, down €182.8 million over 12 months, with leverage⁽¹⁾ at 3.0x, compared to 3.3x at December 31^st, 2017.

^{(1) Ratio of net debt at end December to pro forma EBITDA for the full year}

Financing

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.

The Group’s liquidity remained high, at €1,379.8 million at December 31^st, 2018 (€779.8 million in net cash and €600.0 million of undrawn Revolving Credit Facility).

SPIE’s long term corporate credit rating is BB (Standard & Poor’s) and Ba3 (Moody’s).

In July 2018, SPIE announced the success of its new employee shareholding plan, Share For You 2018. The offer was subscribed by over 6,000 employees and 1,471,793 new shares were issued, raising €21 million. Consequently, the total share count as of December 31^st, 2018 was 155,547,949.

2019 outlook

Having completed all important reorganisations in 2018, SPIE enters 2019 in good shape, entirely focused on operations and on its cash-generative and acquisitive model.

In 2019, SPIE expects:

• Group revenue to grow by 2.5% to 4.5%, including bolt-on acquisitions, at constant currency;
• Full-year revenue acquired through bolt-on acquisitions in the order of €200 million;
• Group EBITA margin to be at least 6.0%;
• A cash conversion around 100% and a continued reduction in leverage.

The dividend pay-out ratio will remain at c.40% of Adjusted Net Income⁽¹⁾ attributable to the Group.

^{(1) Adjusted for the amortisation of allocated goodwill and exceptional items}

Change in management

After 27 years with SPIE including 12 as Group CFO and member of the Board of Directors, Denis Chêne has decided to turn over a new leaf. Gauthier Louette and SPIE’s Board of Directors thank him heartedly for his contribution to the Group’s major developments. Effective today, Michel Delville is appointed Group CFO and becomes a member of the executive committee.

Consolidated financial statements

The consolidated financial statements of the SPIE Group as of and for the year ended December 31^st, 2018 have been approved by the Board of Directors on March 11^th, 2019. Audit procedures on the consolidated financial statements are complete and the Statutory Auditors' report is in the process of being issued.

The audited consolidated financial statements (full financial statements and notes) and the slide presentation of the 2018 consolidated annual results are available on our website www.spie.com, in the “Finance” section.

Conference call for investors and analysts

Date: Tuesday, March 12th, 2019
9.00 am Paris time - 8.00 am London time

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

Next events

• Quarterly information at March 31^st, 2019: April 30^th, 2019 before market opening
• SPIE 2019 Investor Day: May 15^th , 2019
• Annual general meeting: May 24^th, 2019
• Final dividend ex-date⁽¹⁾: May 29^th, 2019
• Final dividend payment date1: May 31^st, 2019
• 2019 Half-year Results: July 26^th, 2019 before market opening
• Quarterly information at September 30^th, 2019: November 8^th, 2019 before market opening

^{(1) Subject to shareholders approval at the next Annual General Meeting on May 24th, 2019}