Spie SA

PAR:SPIE

Earnings Call Transcript 2024-Q3

[Operator]

Hello, and welcome to the SPIE quarterly information 2024 call. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Gauthier Louette, Chairman and CEO; and Jerome Vanhove, Group CFO, to begin today's conference. Thank you.

[Gauthier Louette, executive]

Good morning, ladies and gentlemen. Thank you for attending this call for our Q3 trading update. Before we deep dive into the Q3 performance, let me start with some recent wins that illustrate our high-value and mission-critical solution.

So SPIE has been chosen by ENEA Operator in Poland to install a 50-kilometer long 110 kV power line and modernize the substation in the western part of Poland. This project is key to strengthening the region's energy infrastructure and supporting Poland's shift to renewable. In Poland, we have roughly 100 kilometers of power line already in progress. So SPIE is at the forefront of modernizing Poland's energy network.

On Slide 4, this contract is a good example of an industrial customer looking for a decarbonization solution. SPIE contributes to the commissioning of INEOS, the largest solar farm in Wallonia, deploying 90,000 solar panels over an area of 30 hectares equivalent to 56 football fields. The energy generated will cover 10% of the electric needs of INEOS production. INEOS is a leading European vinyl producer. CO2 emission will be reduced by 40,000 tonnes annually. SPIE is responsible for the substation and the line connecting the solar farm to the plant.

On Slide 5, leveraging the expertise gained in wind offshore from our acquisition of Correll Group in 2023. SPIE Global Energy Services signed 2 framework agreements with Vattenfall. These agreements cover all the existing offshore wind farms and the potential new builds over an initial 5-year period. The scope includes the monitoring of the high-voltage submarine cable system, such as pinpointing electrical cable fault through appropriate testing and measuring cable conditions prior to re-energization. Correll has brought extensive experience, having worked on many of the most significant offshore wind farms around the world. This contract is a very good example of how our M&A bolt-on strategy is enhancing the group's capabilities.

Now moving to the trading update on Page 7. Over the first 9 months of 2024, we have delivered a strong organic growth at 4.4%, reflecting the strength of our business and market position. Our disciplined approach regarding our bolt-on acquisition further supports this profitable growth, expanding both our service offering and footprint density.

The contribution of our bolt-on acquisition added 9.4% to our total revenue growth, aligning with our growth strategy to replicate the SPIE model in every country where we operate. On the back of these robust 9 months, we are able to revise upwards our guidance for 2024 EBITA margin, supported by solid performance and disciplined execution. And this is a good opportunity for me to stress again that our focus on margin increase remains unabated. Overall, the fundamental trends in our markets remain robust and continue to support our profitable growth.

Taking a closer look at our financial figures on Slide 8. For the first 9 months, our revenue reached EUR 7.1 billion, representing a 13.9% increase, with acquisitions contributing for a significant amount of EUR 578 million. Our strong organic growth at 4.4% for the 9-month period includes a solid 1.7% growth in Q3. We continue to see very solid underlying market trends driven by energy transition, while, as anticipated, our pricing reflects a lower cost inflation. Year-to-date, with 6 acquisitions announced, the total annual revenue acquired amounts to approximately EUR 432 million.

Looking [Audio Gap] in Germany, we recorded a strong revenue growth at 33%, including nearly 6% organic growth and the contribution from bolt-on acquisition of 27.1%.

In North-Western Europe, organic growth remained strong at 6.4% over the 9 months, fueled by the good level of activity in all segments in the Netherlands, even if Q3 was impacted by a particularly challenging comparison basis. Total growth amounted to 9%, including 2.6% from acquisitions.

France is showing a solid performance with a resilient 1.5% organic growth over the 9 months. Operations benefit from a wide range of expertise and a diverse client base, ensuring a strong position and resilience.

In Central Europe, organic growth was weak at minus 1.6% in the 9 months with the Q3 impacted by unfavorable contract phasing with energy operators. And as you know, we still see a very high comparison base in Switzerland, as previously communicated. This results in a weak performance in Q3 in Central Europe, which does not reflect the good underlying momentum in our markets in that region.

Global Energy Services reported a strong 19.7% organic growth over the 9 months, driven by an exceptional shutdown operation in Q1 and Q2. We are now moving back to a more normative growth space. The recent acquisition of Correll Group, which strengthened our Wind Energy business, contributed an additional 10.3%.

Now on Slide 10, providing more color per segment and starting with France. We recorded a 3.5% revenue growth, including 1.5% organic growth in the first 9 months. Tech FM was well oriented, thanks to Energy Performance Contracts and efficiency solutions. Industry Services remain on track, especially with electrification projects. So delays in some solar projects affected Q3.

City Networks saw growth from public lighting solutions and energy infrastructure. As expected, fiber activities continued to slow down in Q3. Finally, Nuclear Services started to ramp up slightly in Q3 with maintenance programs returning to normal pace. Of course, we will continue to follow the future government announcement closely. What is already clear is that energy transition remains a priority and we do expect further organic growth in Q4.

In Germany, we recorded an outstanding revenue growth of 33%, including a very strong organic growth of nearly 6% and a high contribution from acquisition of nearly 27% over the 9 months. Organic growth was propelled by High Voltage, City Networks and Grids activities. Indeed, we see the significant capital expenditure made by our customers, the main TSOs and DSOs, aiming at modernizing and adapting the grid to new renewable energy sources, but also further expanding their capacity. Fiber rollout services were developing well as Germany lags behind in this area. Tech FM activities remained solid, supported by energy efficiency solutions and decarbonization projects.

Acquisition contributed to 27.1% in our growth. The integration of ROBUR, now SPIE Industrial Services and Wind, and ICG Group are well on track. ROBUR has reinforced our Industry Services business, where we benefited from various projects on electrification of industrial processes. 2024 is a year of a major change at SPIE. Germany has become our largest contributing country.

Slide 12 on North-Western Europe. We recorded 9% revenue growth in the first 9 months, including a super strong 6.4% organic growth on an already high comparison basis at 18.3% in Q3 2023.

In the Netherlands, organic growth remained at a strong level in the first 9 months despite this particularly challenging comparison basis in Q3. High Voltage activities were very dynamic and the mid- to long-term visibility remains good considering the capital expenditure programs of the TSO.

Industry Services remained strong, boosted by electrification and digitalization projects as well as an expansion of our customer portfolio. Building Solutions was well oriented, supported by blue-chip customers requiring high added value solution, especially with regard to energy saving. Our Data Center's activities comprising mainly maintenance operations continued to support our growth in ICS. And finally, City Networks, as expected, was negatively impacted by the slowdown of FTTH activities.

In Belgium, activity was robust, also supported by High Voltage projects, albeit with some phasing effect in Q3. Industry Services was driven by sectors such as food, pharma, but also battery storage solutions.

Slide 13. In Central Europe, the performance in Central Europe has been mitigated by some unfavorable phasing effects in projects in Poland, Slovakia and Czech Republic. And we had also a very challenging basis in Switzerland, as previously communicated. That being said, Central Europe remains a very dynamic region for SPIE.

Austria continued to deliver a strong organic growth across all segments, especially in High Voltage projects, public transport electrification, but also Industry Services for automation and electrification projects.

In Poland, despite the phasing effects, the business remains well oriented with a very high backlog. The modernization of public lighting is also developing well.

And finally, Global Services Energy recorded a buoyant 29% revenue growth, including 19.7% organic growth. As mentioned, we benefited from exceptionally high activity in Q1 and Q2 with a shutdown operation offshore Sub-Saharan Africa. Q3 marked a return to more normative growth, supported by pluriannual maintenance contracts signed over the last 2 years. Such contracts further strengthened our positioning on the OpEx side of our customers. The acquisition of Correll Group contributed to an additional 10.3% to revenue growth. Integration is well on track and the activity is benefiting from a supportive market environment in the Wind Energy sector.

As every year, and I'm on Slide 15, we launched our SHARE FOR YOU program during the third quarter. The SHARE FOR YOU 2024 has been once again a remarkable success. I'm extremely pleased to see that around 21,500 employees participated, out of which more than 5,000 invested for the first time. 19 countries were involved, and we are very pleased to offer as well this plan to our colleagues who recently joined us from acquisitions.

Upon completion of the related capital increase, the share of employees and management would account close to 10% of SPIE's equity. Involving our employees in the SPIE entrepreneurial adventure is crucial and a key factor of our success as we are a people business.

Now I will hand over to Jerome, who will comment on our financial performance.

[Jérôme Vanhove, executive]

Thank you, Gauthier, and good morning, everyone. I'm on Slide 17 with the revenue bridge presentation. So as mentioned, total revenue reached a record EUR 7.131 billion for the first 9 months of the year, evidencing a total growth of 13.9% in comparison with last year, of which 4.4% of organic growth already detailed by Gauthier, and 9.4% of contribution from our M&A representing circa EUR 578 million of additional revenue.

This includes around EUR 400 million of revenue from our 2024 acquisitions, that's mainly Correll, ROBUR and ICG as well as circa EUR 180 million from the full year consolidation effect of our 2023 acquisitions, notably BridgingIT, ECS and Reseaux Environnement. Finally, our ForEx impact remaining negligible at 0.2%. So this recurring and significant contribution from acquisitions illustrates once more the dynamic of our compounding model.

I'm on Page 18. Indeed, our bolt-on M&A activity remained very active during the first 9 months of the year, as evidenced by the 6 acquisitions announced, representing in total EUR 432 million of additional full year revenue. We pursued our deployment strategy in Germany with 3 acquisitions totaling EUR 320 million of full year revenue. First, ICG, a leading player in telecommunication infrastructure, including fiber and mobile networks, as you know; MBG, a specialist service provider for photovoltaic rollout, mainly for rooftop installation on buildings; and OTTO, a provider of engineering, procurement and construction for pharmaceutical, biotech production facilities with an outstanding EBITA margin above 20%.

In France, we also seized an opportunity in the nuclear domain with the acquisition of HORUS, a market leader in nondestructive testing. Still in France, we bought Spefinox, an expert player in industrial processes for agri-food, cosmetic and pharmaceutical sectors.

And no later than this week, we announced the acquisition of Elektromontaz Poznan in Poland so as to reinforce our expertise in the domain of electrical and mechanical building technology. The closing for this transaction being expected for the first quarter 2025.

So again, our compounding model strategy aims to deploy SPIE's expertise and further strengthen our positioning as a key enabler for the energy transition. Our pipeline of opportunities remains very rich and permanently nurtured as we operate in a highly fragmented market.

Taking into account all the transactions that we have completed this year, our year-to-date total M&A capital expenditures reaches circa EUR 0.9 billion. That being said, let me reiterate that our leverage ratio will remain duly and strictly within the limit of our financial discipline. To be very specific on that, the leverage ratio at year-end will increase, of course, compared to the 1.2x at December end 2023, but it will clearly remain below 2x.

Now I hand it over back to Gauthier, who will conclude on our outlook.

[Gauthier Louette, executive]

Yes. Thank you, Jerome. So in conclusion, we expect further organic growth in 2024 at a slower pace than in 2023, as already stated since the beginning of this year. We do expect a solid organic growth in Q4 not dissimilar and possibly slightly better than Q3. And again, I want to insist on the quality of our organic growth with recurring and low-risk revenue profile as well as solid and long-lasting client base.

Moving to EBITA margin. It remains by far the key lever to create value in our business. As we always say, we do have a margin over volume approach. And let me remind you that our main levers to increase margins are based on high selectivity, quality of execution, a unique positioning and the mission-critical nature of our services, providing for a proven pricing power.

The increase of EBITA margin is this year further enhanced by the accretive effects of our acquisitions. Thus, I'm pleased to revise upwards our 2024 EBITA margin target to at least 7.1% of revenue, representing a minimum 40 basis points improvement, and this will lead this year to an EBITA growth higher than 20%.

We will pursue our bolt-on M&A strategy. We will maintain our dividend payout ratio at circa 40% on adjusted net income attributable to the group.

SPIE is faring well. And as I keep saying, it is a good time to be an electrical engineer. I thank you for your attention, and I will be pleased to take your questions together with Jerome.

[Operator]

[Operator Instructions] We will take our first question from [ Saloni Livigrent ] from Bank of America.

[Simona Sarli, 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?

[Gauthier Louette, executive]

As you know, the price volume effect is always difficult to ascertain for SPIE. And more clearly, we see a lower impact from inflation. That's very clear. Yes, we expect Q3 -- as I said, Q4 to be slightly better. Some of the contracts that were postponed are now started. So they should bring production in Q4. But as you know, it's always very difficult to pinpoint organic growth, quarterly organic growth at SPIE. As I said, we expect something not dissimilar, but probably slightly better than Q3 for Q4.

You are right to point out that the trends for electrification and energy savings are very solid in Europe, and that's what we see. And by the way, the very strong growth we saw in Netherlands or in Germany are quite an evidence for that and also the quality of the trends that -- our acquisition in wind, Correll. So it's -- there are strong trends. But I think we will communicate more precisely about this during our next CMD, which is to take place on March 7th next year. So I will keep further detail for that day, if you allow.

[Operator]

We will take our next questions from Aleksander Peterc from Bernstein.

[Aleksander Peterc, 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?

[Gauthier Louette, executive]

Yes. So regarding the Q4, I've already given an indication of where we think it would land with the caveat of our ability to predict accurately a given quarter. Again, as evidenced by what we see in Germany, Netherlands, to some extent in Belgium as well, the trends for electrification and energy transition remains strong. This is the case for France as well.

Obviously, in France, there is some element of political uncertainty right now which doesn't help customers making decisions. So this slowdown in France is also linked with that notably. As you know, we had a drop in optic fiber, which was planned and anticipated, but which is happening, at some stage, the network is deployed. And that's it. And beyond that, there's a bit more uncertainty in France right now. But the key elements like energy transition are protected.

In other countries, we see very good trends. And again, this energy transition has a major impact on this country, more so than in France because the networks need to be totally reshuffled to accommodate a lot of renewable energy. Whereas, in France, the nuclear plants are still the base of the electrical production and they're not going anywhere. So it's a major difference.

So it's -- and regarding the phasing effect, it's always a bit difficult to ascertain when the full ramp-up will take place. But again, that's why we -- overall, we look at a slightly better Q4.

Regarding EBITA margin, we work constantly on improvement of our EBITA margin, constantly on the improvement of the quality of execution. We also have a contribution from the pricing power, which has remained good for the reasons that we have explained in the past and remain well in place. Customers are very much aware of scarcity of quality resources. So our pricing power remains intact. And then on top of that, we have positive relative effect of the acquisition we made, as anticipated. And they are on track and it brings a relative effect, which we are now able to evidence. So all these reasons allow us to improve our margin guidance for the year.

[Operator]

We will take our next questions from Rory McKenzie from UBS.

[Rory Mckenzie, 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.

[Gauthier Louette, executive]

Yes. So regarding the phasing -- and you mentioned Poland, and you're right, because it is a specific case. It is a country where when we build transmission lines, we get the contract where we need to obtain the permits and do the negotiations for real estate. So we get the contracts very well ahead of the real construction phase. And this permitting and negotiating phase is more difficult to predict in terms of how long it's going to last. And so at some stage, you do not get permits as fast as hoped and so you have to delay the mobilization process.

So that's what -- it does happen now and again, and that's what we see. So it is not our ability to mobilize our own construction people. It's really this permitting phase which takes longer, is more difficult to predict. So that's the main reason. Again, in terms of resources, we are well organized. And when we plan to start a project regarding installation, we do start it on time. So this is what we saw in -- mainly in Poland for this quarter.

Regarding EBITA margin, yes, you're right. We see a ramp-up in progress in H2. Well, first, H2 has a higher weight, as you know, compared to H1. So obviously, the relative effect is more significant. Reaching September, we get a better visibility on how the contracts have progressed and what sort of work we have gotten, what is the mix impact. So obviously, it's a better view on the margin forecast for the year.

And there is also a ramp-up from the acquisitions because we have more turnover contribution from the acquisitions in the second half. And as you know, a number of the acquisitions are relative. So it's a -- again, we see good developments in all our countries regarding margins and the business is supported further by the good performance of the acquisitions. So we are very confident in this regard.

[Operator]

We will move to the next questions from Remi Grenu from Morgan Stanley.

[Remi Grenu, analyst]

Yes, just 2 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?

[Gauthier Louette, executive]

Well, regarding transmission, we experienced double-digit growth in the countries where we do that most, which are Netherlands and Germany. We have a good growth in transmission in Belgium as well. And Poland fluctuates for the reasons we know, but the underlying trend is on the up in Poland as well. So it's a good place to be. And what we see now is we see kicking in a better growth in distribution in Germany. Because now that the trunk lines are being built, you need to connect the distribution grid to these new trunk lines, and it has a very positive impact on growth for distribution in Germany as well.

Regarding Poland, I think we should not overreact. There was a few phasing effects on transmission, but it's a business with a very good margin. And then we -- Poland is a more recent contribution to the group, and we still need to build up this country. The GDP of Poland is 80% of the GDP of the Netherlands. And we do in Poland 1/4 of what we do in the -- or even less than 1/4 of what we do in the Netherlands.

So you see the density is less, the scope of service is less broad, and we are gradually improving the situation by acquisitions such as [indiscernible] that we just -- the project we just announced in [indiscernible], who is bringing -- strengthening our position in the installation segment towards the electrical works. So 2 years ago, we bought a company exposed to the telecommunication networks in Poland. So it's work in progress. And -- but again, we're starting from much further away, and we have quite a way to go.

But nevertheless, we have now a very strong position in Germany, and there will still be a very strong focus in Germany. It is overall -- I think it makes more sense to further grow Germany from where we are, and that's what we are going to try and do.

[Jérôme Vanhove, executive]

Maybe I can answer on the -- on your M&A and capital allocation question, Remi. Very clearly, self-financing of our M&A stays a priority for us in terms of capital allocation. You rightly pointed out that EUR 0.9 billion of M&A capital expenditure is rather on the high side this year, clearly high side. We are not expecting necessarily to replicate that every year. We will pursue to self-finance our M&A operations next year. No issue with that. However, we will observe a very strict discipline on our financial policy, as it has been said. So we are not necessarily expecting next year to be within the same magnitude.

Now we will start at the end of the year with a new leverage ratio. And our business is fueled every year with, as you know, a quite sizable free cash flow also supporting our ongoing M&A. So it will stay a priority, not necessarily with the magnitude of what it was this year.

[Operator]

We will take our next questions from David Cerdan from Kepler.

[David Cerdan, 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?

[Gauthier Louette, executive]

So obviously, regarding our organic growth, I think I've described the trend sufficiently, and I'm not going to pinpoint any figure for this year and specifically not for next year.

Regarding Central Europe, when we mention Poland, we should not forget the impact of Switzerland, which is something that we know about for quite a while, and we had a strong catch-up effect in '23 compared to '22. And then we have the reverse effect in '24 compared to '23. So this is not a surprise per se.

More difficult to anticipate, as we -- as I said, it's the start of contracts for transmission lines in Poland. So this is -- but I mean, we have to make do with that. It doesn't impact our margins because we mobilize people only when we know that installation can start. So delay in permitting, et cetera, it doesn't [Technical Difficulty] significant cost. And we have some compensation also from the customers. So it's not an issue on the margin, and the margin in Poland is faring well. It's clearly -- it impacts the top line.

And regarding our end markets, there is, as everybody knows, a slowdown in commercial installation and especially in office buildings, that sort of thing, which were caught between a rock and a hard place with the higher interest rates, higher construction costs with inflation and tenants not accepting higher rates. So this situation has impacted real estate for a while. But now interest rates are coming down. Inflation is coming down as well. So one could hope that the situation will start to normalize gradually in the course of '25.

The other end markets are doing okay. And again, we're never largely exposed to one single end market. If I take the example of the automotive in Germany, it is less than 2% of our turnover. So we -- one of the strengths of SPIE which makes us very resilient is that we have a very wide -- a very broad range of services to a very wide portfolio of customers. And so it avoids a concentration, which might become risky.

[David Cerdan, analyst]

And when you say the automotive is 2%, is it for the German market or at the group level?

[Gauthier Louette, executive]

No, for the German market, yes. For the group level, it is 1.6%. And again, when we talk exposure to automotive in the German market, it is a lot of maintenance. For instance, we just gained recently the maintenance of a truck factory in Germany, or we maintain the wind channel facility to test aerodynamics of cars for a major manufacturer. And these are contracts that we have had for maybe 10 years. So it's on the maintenance of the facility. And we are very little exposed, if at all, to the process itself.

[David Cerdan, 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?

[Gauthier Louette, executive]

Well, I don't think I will go into that level of detail at this stage. Again, organic growth -- pinpointing quarterly organic growth is not an easy task at SPIE.

[Operator]

[Operator Instructions] We will take our next questions from Eric Lemarie from CIC.

[Eric Lemarié, 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?

[Gauthier Louette, executive]

Well, regarding Data Center, what we do is a bit under EUR 300 million. It's -- and a lot of what we do is towards maintenance of Data Centers, which is a very interesting segment because Data Centers are very intricate. They are mission-critical. And if we -- if you lose air conditioning in the Data Center, you lose the Data Center within 45 minutes. So it's very mission-critical services that we do for them. And so the relationship with the customer is of a very high quality.

And we also install new Data Centers from time to time, obviously, with the caveat that we don't want to embark on 2 large projects in this regard. Again, there is a -- it depends on how the contracts are structured. But we just won some recently, which will provide activity for next year. And the AI is a trend, but there was already a trend with the cloud. And we also have a number of customers who want their cloud solution, but on their premises. So the Data Center activity overall is good for us. AI as such -- and if it were to pertain to use Data Centers, the ones requiring a nuclear plant just for themselves, is probably -- it will probably not be our capacity.

But again, maintenance of Data Center is a very good place to be. And the more new Data Centers, the more maintenance. So it will definitely support our activity going forward.

Regarding nuclear, it's -- well, the good news is that the nuclear plants are working well at the moment. So the energy projection is back on a good level allowing the maintenance programs to normalize. That's what we see now. So we are back to nearly normal activity in maintenance. And it does support a bit of growth in the Nuclear Services right now.

We have won our first project for the new EPRs and with the emergency diesel generator. And this will give us projection next year in terms of engineering and studies and probably more projection the year after in terms of starting some installation works. And then we're prepared to look at the further tenders that are going to come. So it will bring more activity and probably a bit of a step change in our Nuclear business, but not immediately. I don't think anything major will happen before '26 or '27 in this regard.

[Eric Lemarié, analyst]

And regarding the phasing, the phasing impact...

[Gauthier Louette, executive]

Phasing, it's -- we have these issues all the time. It's a bit more visible this time because it happens in Poland, which is a smaller country. But last year, we mentioned we had some phasing effects in transmission in Germany, while this year, we have a double-digit growth in transmission in Germany. So it happens from time to time. I don't think it should distract us from the big picture, which is a very strong underlying trend and which is going to be sustainable in energy transition and specifically in transmission lines and substation. So let's not lose the big picture because of a quarterly hiccup in a smaller part of our activity.

[Operator]

We will take our next questions from Augustin Cendre from Stifel.

[Augustin Cendre, 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?

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?

[Gauthier Louette, executive]

So regarding integration of ROBUR, as you know, we have changed the name now to Industrial Services and Wind. And we're making good progress. We are simplifying the legal structure with the merger of a number of these small companies which are within ROBUR. And we have a plan -- a well-established plan and we're working according to that plan. And then all the other things, the IT system, we'll work on it.

The safety, which is very important at SPIE, so the safety in the organization has been really now established to be matching the SPIE requirements. And all the financial KPIs are now duly in place and duly reported, starting with the working capital, which is obviously essential at SPIE. So doing well. I think a good understanding with the management of Industrial Services and Wind and progress according to plan. We had a number of meetings with the other countries because we have a number of customers in common in the industry, and we're trying to extract more commercial synergies going forward.

As you will remember, cost synergies were not expected to be very high because we saw -- due to the structure of ROBUR, we also needed to reinforce our own structure to accommodate them. And so it was not the main target. One of the main issues was simplification of the legal structure. And as I said in the beginning, this is something where we are progressing well.

Regarding ICG, the acquisition is more recent, and it is now part of our City Networks and Grid division in Germany. Part of the business is new to us, which is a mobile network part. And the optic fiber, we already did some optic fiber in Germany. So the teams are communicating well. So again, progress more recent, but the integration plan has been devised, agreed, and we're working along it, yes.

Regarding the order book, no, we do not communicate on the order book. It is complicated, because, as soon as you do that, you need to communicate what is going to bring projection next year, what is to bring projections the years after. So it's not a simple topic. We look at it in a very detailed way within the organization, but we do not deem it fit to be communicated.

[Operator]

We will take our next questions from Laurent Gelebart from BNP Paribas.

[Laurent Gelebart, 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?

[Gauthier Louette, executive]

To the second part of your question, the -- again, we must mention this pricing power which we do enjoy. So basically, the margins in the order book are evolving well, which is also why we are able to progress our margins significantly year-on-year. It's because it's the orders that we booked in the past which allow us to do that. So it's clearly a favorable trend in terms of margin in the order book, yes.

And regarding tax, Jerome?

[Jérôme Vanhove, executive]

Yes, regarding the current discussions on the financial bill, which, again, it's still a project. So hard to say. But we have made, of course, some assessment of what it could mean for us. Not big, big numbers for '25. If the project is approved and voted as presented, it would be in the region of EUR 18 million. It's not major. And half of that for the second year, again, as per the project the way we read it. And no other material impact on the French CVAE, which is a tax on production. The impact would be absolutely minimal to us. So not a big, big deal.

[Operator]

[Operator Instructions] We will take our next question from Eric Lemarie from CIC.

[Eric Lemarié, 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 2x 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. [indiscernible] would be great.

[Jérôme Vanhove, executive]

That's good you asked this question. It will allow us to clarify things. Regarding the EUR 0.9 billion of capital expenditures, that's clearly what does impact our cash flow, meaning what will result in an impact on our net debt. So that's the enterprise value debt free, cash free of the company we acquire. And of course, if we do acquire a company which does support a debt on its own balance sheet, definitely, it is diluted. So that's neutral in the end. That's the first point.

The second point, it should not be reconciled with the EUR 432 million we announced as the full year revenue of the company and the acquisitions which have been announced this year. When we talk about the EUR 0.9 billion, we talk about transactions that we did complete during this fiscal year. And one example is ROBUR. It's a quite sizable bolt-on we did complete in the course of March 2023, but that was definitely a transaction already announced during the fiscal year 2023 and, obviously, which is not comprised within the EUR 432 million of full year revenue we declared for this year. So pay attention to this.

And last point regarding the multiples. As always, we have a range of multiple depending on the size of the company we acquire depending on their performance and expected dynamic in terms of projection. But nevertheless, that range of multiples probably vary between 5x for the little and small bolt-on up to sometimes high single-digit on transactions which are probably a bit more unique. That was the case typically for ROBUR, allowing SPIE to penetrate the industrial services market in Germany with one of the key player. And for this type of transaction, a high single multiple is -- a high single-digit multiple is well justified.

[Eric Lemarié, 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?

[Jérôme Vanhove, executive]

And plus Correll. So it's a bit more complex than that. Correll also had been completed in '24 while announced in '23. And the very last one we announced in Poland is part of the EUR 432 million of full year revenue, but will be only completed next year. So basically not part of the EUR 0.9 billion.

[Operator]

We will take our next questions from Peter Testa from One Investments.

[Peter Testa, 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?

[Gauthier Louette, executive]

Yes. Well, in '23, overall, we had the inflation in salaries itself was more in the range of 5%. Well, we're looking at something significantly lower in 2024. We're more in the range of probably 2% to 3% depending on -- so generally, there might be a few exceptions. And so it does impact our cost base for labor, for subcontractor as well because an element of the subcontractor is wages. And then clearly also, we've seen a number -- not all, but in a number of supplies, we see lower inflation this year. So we were able to pass the inflation while protecting margins in the past. But altogether, high inflation doesn't help us a lot. It's not easy to pass inflation to the customers. So we prefer to be in a more reasonable range, which is what is happening today.

[Peter Testa, analyst]

And do you think this would be a similar kind of view on '25 for these inflation numbers you're giving?

[Gauthier Louette, executive]

'25 we do not have a view yet. We have a number of collective labor agreements under discussion. But what we see is generally -- I say generally, because, again, there might be a few exceptions. Generally, the trend in terms of wage inflation will be closer to what we saw in '24 than what we saw in '23, clearly.

[Peter Testa, 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?

[Gauthier Louette, executive]

So fiber optic, I think we still do a bit. But I think the impact will probably be less significant towards the end of H1 next year from what we see, where we'll be -- we'll have a very limited balance of optic fiber revenue.

As you know, we are not exposed to large projects. So we don't work for the state in France, and we work for local authorities. So we will not be impacted by any decision on large projects. The only large project where we are exposed is in the Nuclear business, and this is a totally different kettle of fish, where the intention of [ DEF ] and of the government is very clear. So it's more a subject of timing than principle itself.

So where we might see some limitations is for local authorities if they spend less. But again, the majority of what we do for local authorities is towards maintenance, traffic systems, public lighting maintenance, buildings maintenance, et cetera. So this is resilient. We have been there in the past and we have seen years where we saw the French economy quite slack, and we did prove very resilient in those years with no impact on our margins. We see a more quiet top line expansion. But again, we have a very resilient business, a very sticky customer base and a flexible cost structure. So we are able to protect the margin and the cash flow generation even in times of lower economy.

[Peter Testa, 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?

[Gauthier Louette, executive]

Well, it mainly pertains to Germany because so far in the Netherlands, we do not do a lot of distribution. And we're working on it and we're trying to expand in that direction. But in Netherlands, it is mainly transmission.

In Germany, the trunk lines are far from being complete. We have -- in our transmission business, we have now a backlog of about 3 years and we're looking at a very strong tendering activity. So we're looking probably at 10 years still of very high activity in transmission in Germany. And then -- so it's not that we see the end of it, not at all.

And regarding distribution, yes, it starts to kick in. So we -- this year, for instance, we see a good growth in distribution in Germany because of the modification of the network, connect with the new trunk lines and to accommodate all this renewable energy. So this is one factor. There is a factor of EV charging, electrical vehicle charging, in Germany as well. And so we are looking at very good years ahead of us in terms of distribution in Germany.

So this is the main country where this is happening. Obviously, in France, that's not the driver because the distribution networks in France linked with the production capacity do not necessitate large modification. It is only the renovation which is impacting there, yes.

[Operator]

It appears we have no further questions. I will now hand over back to Mr. Gauthier Louette, Chairman and CEO, for any additional or closing remarks. Please go ahead, sir.

[Gauthier Louette, executive]

Thank you for your attention and your interest you take at SPIE. So we're looking at a strong year at SPIE and, clearly, with further organic growth, a very good contribution of acquisition, a very significant margin expansion. And as Jerome mentioned, we'll be very disciplined also in terms of cash generation for the year, keeping our leverage in a very sensible place. Thanks a lot. Have a good day.

[Operator]

Thank you for joining today's call. You may now disconnect.