Spie SA Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Simona Sarli - BofA Global Research - Analyst : This is Simona Sarli from Bank of America. So I have 3, please. So Q3 was clearly a little bit of a sequential deceleration compared to Q2. How much of that would you say is driven by potential contract delays versus price normalization? And also since summer, have you observed a change in client behavior? Secondly, again, if you can provide a little bit more color on the Q4 being sequentially better than the Q3, as you have indicated. So can you talk about the main drivers for that? And how much visibility you have on contract phasing and these starting materializing? Lastly, considering the ongoing electrification and energy efficiency trends in Europe, what is the midterm growth opportunity for SPIE? So in other words, do you see the 4% to 5% organic growth being sustainable in the medium term?

Question: Aleksander Peterc - Bernstein Autonomous LLP - Analyst : So the first question would still be around the revenue trends. I'd just like to understand if a stronger fourth quarter may offset the slight miss versus our expectations in the third quarter. Is it just the phasing of the contracts or is there actually a more material deceleration here that you're communicating on? From the wording of your guidance, it looks like you do highlight that stronger fourth quarter. So I'm inclined to think that it's a wash, but I'll let you explain. And then the second question is, I know that the guidance upgrade for EBITA margins is small, but can you tell us what drove that upgrade? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 8:00AM, SPIE.PA - Q3 2024 Spie SA Earnings Call

Question: Rorie McKenzie - UBS AG - Analyst : It's Rory here. Just 2, please. Thanks for all the discussion already about the contracts phasing in Q3 to Q4. Can you just remind us how these contract structures work? So when you say that phasing impacted the contracts, is that because the client was slow in giving the approval to start work at certain sites? Or is it that you took longer than expected to get the supplies and the people in place? I mean, for example, in Poland, you saw some unfavorable phasing effects, but a very high backlog. So just trying to work out how those 2 things fit together. And then secondly, I think the new guidance implies that year-over-year margins will be up about 50 bps in H2 after 30 bps in H1. So can you maybe just explain where that acceleration comes from? I appreciate your comments already, but is it mix? Is it the acquisition performance ramping up? That would be helpful to know how that sequential trend is working.

Question: Remi Grenu - Morgan Stanley - Analyst : Yes, just two questions on my side remaining. So I think that the wording around the T&D activity in Germany was quite positive. You said that it propelled the growth in the country in Q3. So can you quantify a little bit the level of growth within that specific activity? And if you think that can be sustained over the next few quarters? And if there was any positive phasing effect from contracts in there or if that's sustainable basically? That's the first one. The second one is on M&A and reflecting a little bit on what's happening in Poland with the phasing. Maybe it also shows the necessity for diversification there. So in terms of M&A policy, do you believe that you might have a slight change in the focus from Germany and France to countries where you've got probably a little bit lower density? And on M&A as well, trying to understand what you think is the capital that you can deploy there? I appreciate that the EUR 0.9 billion over the last 12 months is probably a little bit on the high side, but what you believe you can dedicate to that specific part of your strategy?

Question: David Cerdan - Kepler Cheuvreux - Analyst : David Cerdan from Kepler. I've some questions for you. I would like first to come back on the organic growth. So you expect Q4 to slightly accelerate versus Q3. So does it mean that you expect something like 3.8% like-for-like for 2024? And could you -- could it be the trend for 2025? My second question is regarding Central Europe. Are you surprised by the minus 10.7% organic growth in Q3? And have you taken any specific action to restore this organic growth such as maybe further chasing new contracts? And have you taken some action to protect your margin? And the last one is, globally speaking, have you any concern on some end markets? Do you see any cancellation, delay in some projects or pricing pressure that could impact your views for the end of this year and next year?

Question: David Cerdan - Kepler Cheuvreux - Analyst : And when you say the automotive is 2%, is it for the German market or at the group level?

Question: David Cerdan - Kepler Cheuvreux - Analyst : Just maybe a -- just to finish on what you expect for Q4, do you think that all regions will be better in Q4 versus Q3? Or do you see some regions to remain low or maybe below what was the performance in Q3?

Question: Eric Lemarie - CIC Market Solutions - Analyst : I've got 3 questions actually. The first one on Data Center. Could you remind us your exposure to the Data Center market and what kind of growth you got there actually? Do you observe this year any acceleration of this Data Center business due to the implementation of AI? That's my first question. I've got a second question on France. France wants to develop further its nuclear sector. What kind of additional growth could we expect for SPIE going forward? In other words, do you think your Nuclear business in France will step up, I would say, seriously sometime in the future? And the last question on this various phasing effect. I appreciate it's difficult to predict phasing impact, but should we expect significant phasing effects again in the course of 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 8:00AM, SPIE.PA - Q3 2024 Spie SA Earnings Call

Question: Eric Lemarie - CIC Market Solutions - Analyst : And regarding the phasing, the phasing impact --

Question: Augustin Cendre - Stifel - Analyst : I've got actually one main, one remaining. I was wondering if you could detail how advanced you are in your integration of ROBUR and ICG. As far as I understand, I believe ROBUR is made of several smaller companies. So I was wondering where you are in the integration? What are the next steps? How far away are you from a full integration basically? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 8:00AM, SPIE.PA - Q3 2024 Spie SA Earnings Call And my second question, which is actually also a suggestion, but would you consider disclosing your order books at any point to provide us with better visibility in terms of your upcoming activity?

Question: Laurent Gelebart - Exane BNPP - Analyst : Two questions on my side. The first one, beyond the increase of the tax rate in France, do you see further impact coming from the fiscal consolidation policies implemented by the government? And second, regarding the order book, could you comment on the margin in the order book? How are they evolving?

Question: Eric Lemarie - CIC Market Solutions - Analyst : Just a follow-up one. I was wondering -- the EUR 0.9 billion you mentioned as an investment in your cash flow statement for acquisition, I was wondering if it includes the debt of the company you acquired. And in terms of multiples, so should we consider it's equivalent to approximately 2 times the sales acquired this year? And could you maybe share with us the EBITA, maybe multiples of this transaction? Because well, I understand the profitability of some of your -- of this acquisition are very high. (inaudible) would be great.

Question: Eric Lemarie - CIC Market Solutions - Analyst : And this EUR 0.9 billion, if you want to have a sale -- sales in place of this number, what would be the sales? It would be the EUR 432 million announced plus the ROBUR itself? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 8:00AM, SPIE.PA - Q3 2024 Spie SA Earnings Call

Question: Peter Testa - One Investments - Analyst : I have 3, and I'll go one at a time. You make the clear point that lower inflation passing through is something we have to take account of in organic growth. And I was -- and I presume it's mostly related to wage inflation and some material costs. Can you give us some understanding, please, on how that has developed in '24 versus '23, i.e., how much of that lower inflation is impacting the organic growth? And maybe some comment on how we should think about that for '25 since it's an external factor?

Question: Peter Testa - One Investments - Analyst : And do you think this would be a similar kind of view on '25 for these inflation numbers you're giving?

Question: Peter Testa - One Investments - Analyst : Okay. And then on France, you mentioned the point upon political uncertainty. And I was wondering whether you could give some view as to whether that's affecting kind of the short-term decisions taken, i.e., the kind of more book and burn type business? Or whether you see this affecting more substantial projects? And then maybe in addition, fiber optic was slowing down in H2 last year already. Maybe whether -- when do you think that impact is out of the base of comparison?

Question: Peter Testa - One Investments - Analyst : Okay. And then the last question was just on the T&D part. My understanding is that most of SPIE's business is at the distribution phase, i.e., after the trunk line is built. And we're now getting to that point where there's quite a lot of trunk line completion in Germany. And I would imagine the D part is really building up. And I was wondering, firstly, if that's the case in Germany? And where else you think you see that timing factor where the trunk lines are built and the distribution is ramping in other countries?