Spie SA

PAR:SPIE

Earnings Call Transcript 2020-Q1

[Operator]

Hello, and welcome to the SPIE First Quarter 2020 Results. My name is Judy, and I'll be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Gauthier Louette, Chairman and CEO, to begin today's conference. Thank you.

[Gauthier Louette, Chairman & CEO]

Good morning, ladies and gentlemen. Thank you for attending this call for the Q1 results of SPIE in 2020. So before we start and under the present difficult sanitary condition, I would really like to thank all of our employees. They have demonstrated an impressive commitment to face this COVID-19 crisis. Obviously, and sometime as soon as February, we did take strict sanitary measures, and we engaged into close discussion with our customers to deal with the situation. In our countries of operations, government response have been very different from partial containment measures to strict lockdowns, and we had to react accordingly to adapt to each situation and to allow continuity of work to the extent possible in agreement with our customers. I'm really very proud that organization, our people have been able to react quickly, and it demonstrates again SPIE's agility and reactivity and also the quality of the close relationship with our customers. I will start with a few contract examples that do illustrate our resilience in the current context. So on Slide 4, you can see the MontLegia Clinic. This is near Liege in Belgium. And SPIE installed the HVAC system. We finished earlier than planned, and there was a very strong engagement from SPIE teams to allow the clinic to open 8 days ahead of schedule in order to welcome COVID-19 patients. On Slide 5, also an example in Belgium, we are responsible for technical maintenance in the Rega Research Institute where research on the COVID-19 vaccine is in progress. In particular, we are responsible also for HVAC equipment and the institute data centers, and obviously, these are 2 mission-critical installations. We did work on enhancing the health protection of our employees on site, and we ensure the continuity of this operation, which is a very important facility, especially in the current circumstances. And then on Slide 6, we are moving now to Germany. And in Germany, business so far is running very close to normal. We started to install a new 20 kilometers high-voltage line in [indiscernible]. Even in the current context, we see Germany continuing to move strongly ahead with energy transition investments. Our high-voltage business has been very dynamic since the start of the year, both on the production side and on the order intake side. So it's really a very good start to the year for high voltage in Germany and by the way, for distribution as well. So moving to Slide 7 and looking at the key highlights of the first quarter. We did deliver robust Q1 results, combining revenue growth and stable EBITA margin. Obviously, with regard to COVID-19 impacts, we are faced with a contrasted situation from 1 country to another. There is a strong impact in France since mid-March. And on the other hand, we have hardly any impact in Germany and in the Netherlands. Obviously, our balanced geographical footprint has translated into a minimal impact at group level in Q1, but it will be a different story in Q2, obviously. But we did adapt very quickly to this exceptional situation. We implemented significant actions to mitigate the impact. As I said, the impact in Q2 will be stronger, but we think that April will probably have seen the worst. And we are already preparing actively the recovery phase in those countries which have been under lockdown or are still under lockdown today. It's important to mention that we do enjoy a significant liquidity headroom to face the situation. We started the year with EUR 1.4 billion liquidity. It is really enough to face the various scenarios we are contemplating at the moment. And as you know, we have no debt maturity before 2023. I cannot stress enough how the cash management has been good since the beginning of the crisis. It even has been excellent, and I think all the skills of SPIE teams, both operational and financial teams, in managing the cash have already proven a great asset in this situation, so very looking solid in this regard. Moving to Slide 8. As you see, the Q1 revenue growth was plus 2.7%, driven by last year's acquisition, especially the ones in Germany. But on an organic basis, the revenue was nearly stable and it does demonstrate a good resilience indeed. Q1 EBITA was EUR 58.4 million, up 2.6% versus last year. And EBITA margin remained stable year-on-year at 3.7%. As you know, the margin is seasonal and it usually builds up throughout the year. So therefore, we do see the usual low level in Q1. While this robust reserves do reflect a good start to the year, and really, I mean, we're off to a very good year, but right now, it's a little bit -- needless to say that -- pointless to say that today, but we were off to a very good year. We're at a very good start. January and February has been on a very positive trend, excellent order intake, excellent backlog. So it really confirms secular trends to which we are exposed as the energy transition and the digital transformation of our customers. And also, this result do reflect limited first impact of COVID-19 at group level for Q1. Now moving to Slide 9, and we'll be looking at revenue growth in each segment. So in France, we did have a very good start to the year, again, January, February, very strong. Obviously, starting mid-March, the business was very affected by the containment measures and, in fact, even the week before that where we started to see the very strong reactions from the customers. So altogether for Q1, we stood at minus 2.6% organic decline and really due mainly to the second half of March. It was partly offset by the contribution from Cimlec, which brings 1.4% growth. Cimlec is an acquisition of July last year. In Germany and Central Europe, activity was largely unaffected by the COVID-19 crisis. There were softer containment measures, and most of the customers continue to work on an almost normal manner in Germany. We also had a very good start in distribution and in high voltage. So altogether, organic growth was 1% and it was complemented by a strong 7.6% coming from last year's acquisition, Osmo, Telba and Christof Electric. It's worth mentioning that Telba specifically is fairly well involved in dealing with the health institution and specifically hospitals. North-Western Europe, it grew organically by 3.6%. So we had the dynamic trends in the Netherlands. Business is also largely unaffected by COVID-19. We saw -- and also by the decision of the Dutch government to go for soft containment measures. We do see business stabilization in the U.K. at the first quarter compared to what we experienced last year. But obviously, starting March, April, we do see impact of lockdown measures. While in the U.K., we sold our mobile maintenance activities in March, and this translates in a minus 1.5% impact from changes in parameter. And regarding Oil & Gas and Nuclear, minus 4.2% organically for Q1, really linked to the Nuclear business. And we do -- we still experienced a slight growth in Oil & Gas for the first quarter. I will come back to that. So moving to Slide 10. We have done a small map to give you an idea of the COVID-19 impact in Q1. So you see, we had a strong impact in France and in Belgium, more limited impact in Q1 in Central Europe. There was some lockdown in Austria, but it didn't last long. And we had, towards the end of the month, containment measures in the U.K. And then we have the 2 countries which have been largely unaffected and which are the Netherlands and Germany. So again, the importance of the balanced geographic footprint of SPIE is really -- needs to be stressed and really comes to our help for this beginning of the year. So we now look in detail for -- at our segments and starting with France. So moving to Slide 11. So again, a good start for the first 2 months of the year, and we're really on the same trends that we experienced in 2019. And then starting in March and more specifically after mid-March and the announcement by President Macron of the lockdown measures. We saw a very strong impact on the activity. We managed to ensure continuity of essential services, communication networks, energy infrastructure, health facilities, banks, pharmaceutical, food industry, where we managed to maintain some level of activity, obviously, also ensuring everywhere the integrity of the customer assets. But we also saw significant parts of the business being suspended and postponed for the time being. Specifically, the commercial installation has been very strongly hit, and we also saw a strong impact in the industry. We have seen a strong impact, but to a lesser extent, in ICS and telecom services. Altogether, the level of activity in April was low in France. We're looking at 35% of our normal activity in France for the month of April. We do think that this was a low point, and we're actively preparing with our customers recovery phase, which will probably start happening in May. And in some areas, from the beginning of May. In some areas, a bit later in May. And we also think that then we will see a stronger recovery in June. But clearly, altogether, the impact on Q2 in France will be significant and obviously much more than Q1. It's worth mentioning that the 35% level of activity in France in April compare to roughly 85% elsewhere in Europe. So it's really a big difference between France and the average of the other countries in April for SPIE. Now moving to Slide 12. And this is Germany and Central Europe. So what we see, obviously, is a very different situation from France. It's a very active quarter in Germany and Central Europe. Altogether in Germany, revenue grew organically by 0.8%, and this compares to a good quarter last year. Transmission & Distribution Services were very dynamic. And clearly, the pace of investment in this area doesn't -- to date, customers are very active. We also had a decent start to the year in our maintenance activity as well, in commercial maintenance. We have some impact in building technology and automation due to -- with -- nothing to do with the COVID crisis itself. We were expecting to start production on the large data center. And the order has only come in April, so obviously, we had some delays there. But this is an activity which we'll be able to start now. I think it's also worth mentioning the good quality of the acquisition of 2019. As I said, Osmo is doing very well at the moment in the area of commercial installation and tunnel fit-out. And then as I mentioned, Telba is very active in the area of hospitals. And it's -- it had -- it's a very positive contribution to SPIE. So well organized in Germany at a government level to deal with this crisis and a very good response of our teams also to adapt and implement the measures decided by the government. So a really good start in Germany. And we expect the activity levels in Q2 to remain very resilient. It doesn't mean that we'll not be affected at all. We work for customers like Lufthansa, for instance, who are in dire straits. But -- so we'll not be totally immune to the direct or indirect impacts of the COVID-19 crisis. But altogether, we're looking at very resilient levels in Q2 in Germany. In Q1, Central European countries also largely unaffected by the COVID-19. And in Switzerland, we saw different impacts. We see the area of Geneva more impacted, but a lot of what we do in Switzerland is linked with ICS information and communication services. They can be operated remotely. So altogether, the impact in Q1 was fairly limited in Switzerland. And we see now, as we speak, a good dynamism to restart work on a more normal level in Switzerland in April already, end of April and for May. So really a solid Q1 in Germany and Central Europe and looking at a resilient activity in Q2. I will now move to North-Western Europe, where the robust growth is driven by the Netherlands. It was really strong growth in Q1, where we see good trends in most markets with maybe a smaller difference regarding industry. As you know, the Dutch government didn't decide any strong containment measures in the country. So business could continue close to normal levels. And -- but we see -- we did ensure that the working practices were adapted to safeguard the employees and the customers. We saw a very good activity in infrastructure, in smart city, maintenance services at a very good level, information and communication services doing really well. And industry services started to be impacted by lower demand, and we think that it would remain on a lower level in Q2 as well. In U.K., the revenue grew in Q1. Business recovered from a very low level in 2019, and we resumed some sort of better activity with a number of customers. And we have also a decent activity in the area of data centers. Towards the end of March, we did see the impact of containment measures, and it would be much more significant in Q2. In April, we have started to implement a lot of these furlough measures, so we have a significant drop in activity in April already. In March, in U.K., we completed the sale of our mobile maintenance activity. So it represented roughly 15% of the revenue of the U.K. in 2019. As you know, this was dedicated to retail activities at a very difficult year in 2019. And there was still burning cash, so we sold the business. It has a negative cash impact of around EUR 10 million, has a stronger net income impact, but the cash impact is around EUR 10 million. But Michel will give you more details on this. And in Belgium, we did have a good start to the year. And then we had the containment measures similar to France, really, in March. So building and industry services were heavily impacted. Infrastructure and information and communication services did resist better. And in April, we're looking at a level of activity in Belgium which is around 50% of the normal activity. In Belgium also, people are working to try and improve this for the months to come, but we were at 50% in April. And now moving to Oil & Gas and Nuclear, where we had a strong performance in Oil & Gas and -- but a lower activity in nuclear. We still managed to grow in our Oil & Gas Services division in Q1 even with a very high comparison basis for last year and despite the operational constraints which have now been imposed by the COVID-19 crisis. So dealing with the sanitary situation has been done well, but now we are facing another crisis in oil and gas, which is linked to the very low level of oil prices. And obviously, it will put an increased pressure on the whole industry. So we'll start to see the impact in Q2. But I think that our positioning on the market really helped us a lot. And going forward, we have maintained 1/4 of our activity in downstream, so we hope that it will help the resilience. In the Nuclear services, there was a drop anticipated due to the Flamanville phasing out, so this was anticipated. On top of that, we had some impact from COVID. There was a shutdown of the activities in March, and now EDF is risking using its program. So it has some impact. It has some -- it will have some impact on Q2 as well. But then it is really a matter of rescheduling, postponing, but by no means any canceling of the works. So we think that the level of activity will resume at a more normal level. In April, we were slightly above 50% for the activity in the Nuclear business in France. So now I will hand over to Michel. He will comment on our Q1 financial performance.

[Michel Delville, Group Chief Financial Officer]

Thank you, Gauthier, and good morning, everyone. I'm now on Slide 16, whereas you can see the income statement highlights. So as Gauthier already pointed out, we achieved a robust performance in Q1. Revenue increased by 2.7% to EUR 1.6 billion. Our EBITA at EUR 58 million increased by 2.6% versus last year. And our EBITA margin was stable at 3.7%. All these numbers are including the impact of IFRS 16, and this is why in the Q1 2019 MDA that you are reading on the table, you see EUR 56.9 million and not EUR 57.7 million as we reported a year ago. So this was a number excluding IFRS 16, and now we report including IFRS 16. So the numbers are comparable year-on-year. So the stability of our EBITA margin reflects a decrease in France due to the first impact of the COVID-19, offset by an improvement in North-Western Europe, while Germany and Central Europe was stable. Let's go on the Slide 17, where we show the detailed revenue. So we posted a revenue -- a robust revenue growth at 2.7% or 2.3% if you exclude the ForEx, which is slightly positive. On an organic basis, revenue was nearly stable, as detailed by Gauthier, and we had a plus 2.9% impact from last year's acquisition and a slight negative impact of minus 0.3% from the disposal of U.K. mobile maintenance activities completed in March, and therefore, they consolidated that month. You will find in the appendix that this disposal had a EUR 40 million negative impact on our IFRS operating income, of course, not on our EBITA due to the one-off nature of this transaction. We sold the business for a negative price of around EUR 10 million, so this is the cash impact that Gauthier has mentioned. The remaining EUR 30 million impact on the P&L are representative of the net book value of the business at the date we sold it and is noncash. So let's move to Slide 18. On this chart, we remind here, and I think this is very important in the current context, that we have significant liquidity headroom to face today's challenges. First, our liquidity is very high. It was in excess of EUR 1.4 billion beginning of 2020, including a EUR 600 million revolving credit facility, which we have preemptively fully drawn in March by precaution. And the second important point, we are not subject to any covenant at midyear. So our bank debt is subject to 1 single covenant measured only at year-end and pertaining to a leverage ratio less than or equal to 4x EBITA. For reference, I remind you that our leverage at the end of December 2019 was 2.7 and that our target pre-COVID was to be below 2.5 at the end of this year. So we have here a significant headroom. And the third important point that I would like to highlight here is that we have no debt maturity before 2023, so nothing to refinance in the next 2 years. And you can see this on the bottom of this chart where we show the maturity of the term loan and the revolving credit line in 2023 as well as the securitization program. And if you all saw the 2 months of '20, so expiring in 2024 and 2026. Finally, I would like also to stress the very good job being done by our teams across the group in terms of cash management in this particular context. And this reinforces our confidence in the ability of the company to face successfully the current situation. I will now hand back to Gauthier.

[Gauthier Louette, Chairman & CEO]

Yes. Thank you, Michel. I'm moving to Slide 20, where we will -- we focus on the cost mitigation measures that were rapidly implemented to face the COVID-19 crisis. So you see we worked on our subcontractors, our purchases and our temporary workers' cost, and they account altogether for about 50% of our operating cost base. And these costs were very rapidly and drastically reduced, where necessary, and in line with the drop of activity or even beyond for temporary workers. Permanent personnel costs. They've been offset to the extent possible by the temporary unemployment schemes that are available in most of the countries where we operate. So I mentioned in the U.K. this furlough system. In Belgium, we have some temporary unemployment, which is directly paid by the government. In France, we have also some temporary unemployment schemes, which have been implemented immediately. And all the sides have been accepted by the authorities. And in Germany, we have negotiated the [indiscernible] schemes with the worst [indiscernible] and in line with the government measures. There are different systems to -- which could be triggered in Netherlands, depending on the level of activity which we will reach. So we have implemented all these schemes very rapidly, and they set a very large proportion of the permanent cost of the employees and especially the productive workforce. But clearly, there is an element of this permanent personnel cost which is not reduced in proportion with the drop in turnover because you have staff, you have management position, et cetera, which you need to keep. And so an element of fixed cost in the permanent and the personnel. And there's also an element of a fixed cost, obviously, in terms of real estate, et cetera, which cannot be adapted immediately. So it will -- altogether, this element of fixed cost will weigh on our margins during the lockdown period, and the amount of pressure will depend on the level of the drop of the activity. We are a resilient group with a strong financial position. I think that we have demonstrated that in Q1. But as we said, Q2 will be more difficult. But Q1, we did deliver robust results, limited impact of COVID-19. Stronger impact on revenues and on margins in Q2, especially in the countries under lockdown. We have implemented rapidly strong mitigating actions, but as I said, will remain a pressure on the margin. What's important is we are very actively preparing, together with our customers, a recovery phase, and we do see in the country under lockdown, but now the customers are eager to restart works. And we see -- it's a lot of work because on every site, you have to really think about the measures you are going to implement. But this is what we are doing right now. We want to stress out the mission-critical nature of SPIE services, our balanced geographical footprint and our strong financial position and excellent cash management, all these constitute major strength in the current context. And then there will be a day after the crisis, we believe that it is strong focus on the energy transition and the digital transformation of our customer will definitely put us in a good position. These trends are there to stay. They might even accelerate, driven by the upcoming stimulus plans. And I observe that a lot of stimulus plans are really focusing on green recovery, green deal, et cetera. So midterm, I'm very confident in the ability of SPIE to benefit from these long-term trends. So we thank you, Michel and I, very much for your attention, and we are now available to answer your questions.

[Operator]

[Operator Instructions] The first question is coming from the line of Chirag Vadhia from HSBC.

[Chirag Vadhia, Research Analyst]

It's Chirag Vadhia. I hope you're well. First question is just on, I guess, a post-COVID world and if there's further social distancing measures and a more gradual recovery. How do you see the business performing if you see maybe some smaller clients going under?

[Gauthier Louette, Chairman & CEO]

Well, it's -- obviously, it's not easy to forecast what the economic context will be. I think we -- well, first, we have very solid customers and everything that has to do with energy, with infrastructure or its large customer who are investing constantly. And like we work for the [ rigs ] that will start in the Netherlands [indiscernible] the climate change mitigation has a lot of impact on the infrastructure in the Netherlands. And this will continue, same as our high-voltage customers, Amprion, TenneT, et cetera. The plan and investment continues unabated. There will be an element of hardship for other customers and for a number of customers. Like, the hospitality industry is in dire straits, and we see that at -- even at Lufthansa in Germany right now. And then the context in hospitality will obviously not be easy. So I think that there will be an element of impact going forward. But for us, we are used to that. We weathered the 2008, 2009 crisis without difficulty. When you're looking at a 5%, 6%, 7% drop in activity, we are able to deal with that and maintain the cash flow, maintain the margin. It's not a big issue. What we are facing right now with a 65% drop in activity in France in April, it's a different kettle of fish, and so we have to deal with that short term. But then midterm, if we come to, let's say, a more normal economic recession, we are used to deal with that, and it will not pose a problem to SPIE.

[Chirag Vadhia, Research Analyst]

And I guess in the run-up to the COVID impact, how has businesses such as wheat in the Netherlands and these sort of things in the run-up been performing currently now in this period?

[Gauthier Louette, Chairman & CEO]

Well, as I said -- well, first, if you are looking at -- even at the end of April, the figures in Germany and you are coming out of a cave, you would not know that there is a virus in Germany. And it's very stable. And in the Netherlands, I'd say this has a very limited impact as well. Obviously, as I mentioned, this industrial sector in Netherlands is affected by the economic context. So -- but right now, in the Netherlands, the activities is closer to 90% maybe even a little bit more of the usual level of activity as we speak.

[Chirag Vadhia, Research Analyst]

And my final question is just in terms of free cash flow generation at this stage, how is the trend of cash flow generation currently in the exit run rate of March versus maybe last year?

[Gauthier Louette, Chairman & CEO]

It's very good. We have -- I will let Michel give you more detail, but the cash flow is excellent, excellent.

[Michel Delville, Group Chief Financial Officer]

Yes. It's -- of course, it's a point that we are looking at very closely as you can imagine. And I think it's important to highlight, although we don't communicate any information on the balance sheet at quarters, but I can tell you that at the end of March, our net debt is very good and significantly better than end of March last year. So, our team, as I said, our team, of course, the group is doing a very good job. You know that we have a usual seasonality in our working capital, and we usually have a negative cash flow in H1 every year due to the seasonality. Last year, it was about EUR 500 million. So -- and it is more than fully reversed in H2. So as I said, we have a strong liquidity and a large headroom to cope with that. And at this stage, as we speak, we do not see any deterioration in our working capital. So for instance, in terms of customer payments, we follow this on a daily basis, and we have no sign of deterioration. And also, we will temporarily benefit from the government measure. So -- in certain countries, so we can postpone tax and social charges payments to H2. So I think -- so in any case, I think we are more than enough equipped to face this depressed Q2 ahead, and we have no need for any additional financing. And as you know, the group has been always focused on working capital management, and we are doing even more, of course, during these times.

[Operator]

The next question comes from the line of Charles Scotti from Kepler.

[Charles-Louis Scotti]

I've got a couple of questions. The first one, can you repeat the level of activity by country in April? And what do you have in mind in terms of trajectory and target by the end of Q2? In terms of activity as well, do you expect a catch-up effect in Q3 and Q4 in some businesses like your optical fiber? Or do you expect your customers to postpone or cancel maintenance services? In terms -- also my third question, how it works especially with customers when you have yearly or multiyear contracts? Are they asking for a rebate, discount? Or how does it work [ concretely ] when your staff is not able to go to the client [ premises ]? And my last question is on bolt-on M&A. I'm not sure I have well understood in the press release, what do you mean by review of the bolt-on M&A strategy? Does that mean that you will opportunistically step up your bolt-on M&A if you find some interesting targets?

[Gauthier Louette, Chairman & CEO]

Well, so regarding Q2, well, it's a bit early to give detailed guidance for Q2. It's -- a lot will depend in those countries where we had some lockdowns, in France, Belgium, U.K. A lot will depend on how well and how fast we are able to restart work, yes. And so it's -- well, it's happening as we speak but will be helpful to give a number, right? So much work with so many customers and so no figure. I think it should ramp up clearly from the 35 where we are now in April for France, but I cannot give a detailed figure today. I think overall, but it will remain significantly below what was for the quarter compared to last year. In those countries where we had no lockdown, like Germany and Netherlands, it should be much closer to normal. But then the impact of some of the customers, as I mentioned, reducing the investments, et cetera. So I mean, depending on the countries, those countries which have not experienced any strong confinement, I would look at something probably for the quarter maybe in the single-digit drop compared to last year, no more. And then Oil & Gas, we are assessing the situation right now with various customers. So there will be an impact of the containment measures, et cetera. There will be some productivity impact because it will be more difficult to work. And by the way, of this productivity impact, we are now engaging with customers to try and renegotiate prices. So it's not only discounts and rebates that they're asking for. Some of them do, obviously, but we're also going to have to explain what extra costs we have due to the measures we have to implement. So it will be a fruitful dialogue with many customers in the weeks to come. And then the last impact is those customers will be forced to reduce their level of spend, even either temporarily or more long-term basis, depending on their own situation. So that's why it makes not an easy task to forecast what Q2 is going to be, but clearly, a stronger impact in Q2 on volume and margin than in Q1, this is definite. Now to the catch-up effect, I think some of the activity will resume and you mentioned optic fibers. It's clearly an area where we had some fruitful discussion with the customers, both on program of activity and on cost because they -- as they reckon that we have some productivity issues, et cetera. So this is -- I'm talking of France. I think this is an area where we have a good discussion at the moment and very decent prospectives. There are also customers who want to accelerate, the health, the pharma sectors. They're looking at accelerating some spend. And we see that also in the area of data center. I mentioned a large order which we got for a data center in Germany and there is quite more investment of the same kind to come in many countries. This crisis has stressed more than ever the importance of digital tools. Talking about the multiyear contracts, well, various types of discussion with the customer at the moment, very early obviously to say. But if I look at Germany, for instance, clearly, we are maintaining the base contract. The churn work might get affected in some areas. And in other countries, we are discussing about the customer about remuneration during the shutdown period. But our stance is that we have a base contract that the churn work has been affected, but the base contract is a base contract. So we have this type of discussions. Not everywhere, a number of customers are not going this route. A few are but this is ongoing discussions right now. And coming to bolt-on M&A, there's no change in the strategy. We're looking at bolt-on. We're looking at -- obviously this year, we will be probably more on the soft [ pillar ] regarding bolt-on but it doesn't mean that we are not going to do any. And specifically, we're looking at a number of topics in France and in Germany. And we will pursue these opportunities and see where we also have to look at how some of them have been impacted by the crisis. So in Germany, it is less significant. And then also as we mentioned, maybe new opportunities will come up due to the crisis so we'll be very -- on the lookout for them but any specific one in mind right now.

[Operator]

And the next question comes from the line of Sylvia Barker from JP Morgan.

[Sylvia Pavlova Barker, Analyst]

Could I check, at the group level, it seems like from the various comments, you're probably running at about down 30%, 35% in April organically. Is that right? Then in France, so 35% of activity in April. Could you -- obviously, you've been asked this a few different ways, but just best guess or just qualitatively, kind of how much of this is just delayed? To what extent are you seeing the conversations kind of suggesting that a lot of this is simply because you cannot access premises, and you will come back in May and into H2? And then in Oil & Gas, kind of what are the conversations at the moment? To what extent are kind of facilities likely to actually be shut down? Or are there conversations around pricing at all? And then finally, government investment kind of going into kind of green energy or continuing to go into green energy. Where are you seeing kind of the good pockets of investment going on over the next kind of 12 to 24 months across your countries?

[Gauthier Louette, Chairman & CEO]

Yes. Thank you. So well, regarding organic growth, one thing I'd like to mention and with regard to the margin pressure, obviously, it's not the same if you have a 20% organic growth, organic decrease and decline, for instance, across the board or is the 20% stem from a 40% drop in one country and a 10% drop in the other, right? Obviously, the impact on the margin due to the amortization of fixed cost is very different. So I think it's important going forward that we look at that per country as opposed to per se, I mean, generic at group level because the impact is different. So this is why for us, a major focus is to restart the activity in France because the impact on the margin is obviously very significant at current levels. It's -- right now, the drop in activity is essentially due to lack of access to the sites and not due to cancellation of orders. I think it might happen in some areas. For instance, we're working for Aeroport de Paris, and clearly, the prospects of Aeroport de Paris are fairly bleak and so the amount of investment will probably be on a low level, as an example. But for optic fiber operators, it was really a question of access to site and this will resume. And similarly for our Nuclear business, again, a question of access and sanitary precautions so it will resume. Nothing is lost there. So it's really -- at the moment, it's mainly access to sites and not cancellation of orders. But it doesn't mean that we will not see some cancellation of orders or low level of churn work in the months to come. And clearly, there will be some impact on a number of our customers. Regarding Oil & Gas, it has been a huge shock for the oil companies. Total has communicated recently that they were a cash breakeven point is at $25 a barrel. It used to be closer to $100. And they also communicated that the cost of production has dropped in the past years from $10 to $5 a barrel. So there are -- all the oil companies are in a better condition that they were years ago in terms of cost structure, et cetera. Nevertheless, they are facing a huge shock at the moment. And clearly, there will be an impact on the amount of spend, and they will try to squeeze the cost of production as well. That means us. So yes, we're facing some discussion with the customers. I mean, we are not starting but they're indicating that they want to engage into this sort of conversation. But we've been there before. We managed to safeguard the margin throughout this sort of periods. And then government investment in green economy, I think obviously, this infrastructure itself, to connect renewable production plans, this is going on. This is going on in Germany, in the Netherlands, in Belgium and there's no change there whatsoever. It's even going on in Poland. We're working on the wind farms right now. So this will be an area where the focus will remain or might even be increased. Then clearly, the focus on green transportation. And so electrical vehicles will remain. It's a very definite access. It might even be accelerated if one of the way forward is to encourage people to change their car to support the automotive industry. And so we see opportunities in this area very clearly. And then also, as already indicated by the French government, there should be some strong push towards improvement of energy efficiency of the buildings. So these are clear areas where we are very present, and so we should benefit from this midterm, definitely. And it would kind of see a consensus across Europe towards this axis. So we are confident that the stimulus plans will have a strong element of this green boosters.

[Operator]

And the next question comes from the line of James Winckler from Jefferies.

[James Peter Winckler, Equity Analyst]

Apologies if I missed this directly but just reiterating Sylvia's question. The 35% activity in France, 85% average elsewhere sort of implies negative 35% in April. Wondering if that's the right figure. And then also curious if you're able to give any comments on what trading was for the final 2 weeks in France. And then second question is in terms of the impact to the margin, obviously, you have a highly flexible cost base. Wondering if you could give any color on how to think about negative drop-through headed for the rest of the year in terms of what EUR 1 drop in revenue would translate in terms of reduction in EBITA and what to expect there.

[Gauthier Louette, Chairman & CEO]

Well, as I just explained, the -- we cannot give an answer across the board for 1 drop of euro is how many cents in EBITA because it's -- as I said, it really pertains to the magnitude of the drop in a given country. So it's a 10% drop or 40% drop have a totally different impact on margin because of the element of fixed cost. So this is why we -- and obviously, if it's a 10% drop, it's much more easier to deal with. And it also depends I mean how much time, if you have a couple of months ahead to forecast and plan. But we have a flexible cost base, we can work this out as we did in 2008, '09. It was really not a big issue for us at the time and we even managed to increase our margins at the time. But if you have a 40% drop in 1 week, then you're talking different. And so this is why it's meaningless to give this sort of percentage. Yes, in April, as I said, it's roughly 35% in France and averaging 85% elsewhere. And it's not that we -- that we have seen a continuous decrease from week to week in April. But first, it's not easy to measure that from week to week. But altogether, the shock has been fairly immediate. And then it's -- we are now more on a slight upcoming trend because we see a number of sites restarting gradually. So it's not that it's going even further down end of February compared to beginning of April.

[Operator]

And the next question comes from the line of Simona Sarli from Bank of America.

[Simona Sarli, Research Analyst]

First of all, it's just a very quick follow-up on your -- what you said on capital structure and cash flow generation. What is your average cash expense on a monthly basis? And also you mentioned in your press release what was your liquidity at the beginning of the year. If you could please comment on what is your liquidity at the end of March or April. And also secondly, I appreciate the current uncertainty but how should we think about H2 in different geographies? Maybe you can provide an indication of what you expect in the different scenarios, so dependent on when the lockdowns have lifted. And lastly, if you can please remind me your end market exposure at the group level.

[Gauthier Louette, Chairman & CEO]

Michel, you wanted to answer on cash?

[Michel Delville, Group Chief Financial Officer]

Yes, I will start with the first question. So what we said is that we have a liquidity of more than EUR 1.4 billion at the beginning of this year. We are -- usually, I've also mentioned and reminded that usually, there is a seasonality. And H1, we have a negative cash flow. So last year, for instance, this negative cash flow was about EUR 500 million for the first half and then it reversed and or more than reversed in the second half. So what we see today, we see no difference in this trend because it's the usual trend. So you can guess that if the liquidity is EUR 1.4 billion at the beginning of the year and you've earned EUR 500 million, you will net with EUR 900 million the difference. So we are on this trajectory. As I said, we see no deviation compared with the usual trend. We are even better at end of March in terms of debt compared with last year. So it means that things are under control in terms of strict working capital management. And today, although we may face in the second quarter some more problems on receivable collections, it can happen. We don't know yet. But so far, as I said, we see no deterioration and things are really under control. So this is what I can say on the liquidity and with a significant headroom, as you may understand.

[Gauthier Louette, Chairman & CEO]

Thank you, Michel. I think we're strong on cash. So regarding H2 again, I'm not in a position to give a guidance for H2 today. Well, I think what we clearly see that we will have a similar trend in Germany, I mean, very resilient. And I mentioned we'll see possible single-digit drop in Germany, and Netherlands similar and maybe a bit worse. The other countries, it's -- we think it would be fairly, fairly resilient in Central Europe. U.K. will be somewhat down. Actually, we have a lot of people on solo right now and the outbreak in U.K. is raging right now, so it's not clear to see when activity can resume on a more normal level. So there will be some impact in the U.K. And then as I said, France, it's very different. The 10% difference in the level of activity has also a strong impact on the margin at this low level of activity you see, and it's got -- customer by customer right now. So it's -- we will ramp up definitely. But I would be very lacking caution to state a number for H2 right now. So I'm afraid you have to bear with us and wait a bit to have more clarity on these figures. Regarding the exposure to various industry, and if I remember correctly, industry -- at group level, industry is 18%, efficient building is the same. Smart City is roughly 40%, I think it is 38%. And energy, it is slightly above 25%, say, 26%. These are our exposure. And then regarding H2 again, I think H2, we'll have come to -- hopefully to -- a way to come back to more accepted and agreed ways of working with our customers. We'll be fixing a lot of negotiations regarding productivity, regarding additional costs, regarding the expectations for discounts, et cetera. So there will be quite a lot of work with the customers on the second half from the contractual point of view. I think as I said, a number of the customers will be impacted by the crisis and I've also said will benefit from this crisis. Altogether, reasons to -- I should -- my expectation is that in those countries where the COVID crisis has been the less strong, activity will be much closer to now more safe for these customers who are really affected. And I think that in areas where the lockdown has been very strong, there will be still some impact on H2 but way less than what we have experienced so far. So depending on the economical context but from the sanitary point of view, I expect H2 to be much closer to normal.

[Operator]

And our last question comes from the line of Nicolas Tabor from MainFirst Bank.

[Nicolas Tabor, Analyst]

Nicolas Tabor from MainFirst. The first one would be on the dividend. You already decided on the September dividend for the 2020 exercise. Do you already know if the French government will allow you to pay a dividend -- interim dividend in September? Then the second question would be on the restructuring and nonrecurring. Do you have already a visibility in the Q2 impacts you may have between the EBITA and EBIT level? And then on the Oil & Gas, do you already -- I guess it's difficult to assess, but do you know already how much impact you may face from the price pressures on the barrel? And how much, let's say, rebates can be asked by your clients? Do you already have visibility on the acceleration of decline for the Oil & Gas segment you may have in Q2 and beyond?

[Gauthier Louette, Chairman & CEO]

First, starting with the dividend, we have not -- I mean, we thought about the September dividend or not yet. It's -- I mean, we are dealing with a lot of pressing issues, so we don't know. As you have seen, our decision of the dividend was not linked with our cash situation. And the more we go, the more we can confirm that, so it's not linked with that. So we don't see what the government or other players' stance will be come September, October. So we're -- too early to say. Regarding restructuring, we may have some at H2, but I think it would be limited for the first half of the year, definitely, and then we'll see what the economic context evolution is going to be. We need to have a better clarity on the end of the year and also on what 2021 could look like. And so obviously, we'll be very attentive to that. And -- but anyway, H2, it is -- it will be very limited, if any. And so far, as you know, we have not budgeted any restructuring -- we have not budgeted any restructuring costs for this year. And then regarding Oil & Gas, also very early to say. We were just starting talks with the customer who had been quite shell-shocked for the past weeks. So difficult to say now how they will want to proceed and what they'll be looking at. Again, we have done lots of efforts in the past to streamline the operations of the assets. And I think together with our customers who have really optimized all these operations, so it's difficult to see what much you can do in such a short period after the last cut. So -- but again, very early to say.

[Operator]

And Gauthier, that was the last question in the queue. I'll now hand it over back to you, Gauthier.

[Gauthier Louette, Chairman & CEO]

Well, thanks to all of you for your attention this morning and for your questions. Well, I think that we did weather the start of this crisis well. Clearly, we'll be looking at a much more challenged Q2, but we are confident that the company is well poised to deal with this Q2 change, and we are confident also that activity will rebound to a more normal level in Q3 and going forward. And then midterm, clearly, the company is positioned on areas which should benefit from stimulus plans, which -- areas which are very dynamic before the crisis. So I'm very confident midterm on the quality of the strategic positioning from SPIE and its ability to retrieve growth in the future years after what looks to be a difficult 2020. But we'll have better times, and the company is well poised to come back to a more normal situation. Thanks a lot for your attention and stay in good shape. Have a good day. Thank you. Bye-bye.

[Operator]

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