Alten S.A.

Hello.

Welcome to the Q1 results call of Alten. Bruno Benobiel, Deputy CEO, will take the call. Over to you. Good evening. Thank you all for joining our quarterly call for the business of first quarter 2021, the resumption of activity that we saw in Q4 of last year that was a very low at that point, has strengthened, as you can see through the figures in the press release sent out by Cecile a few moments ago. Even if performance remained mixed, both geographically as well as sectorally, the Business decrease has been almost half versus Q4 2020, whereas Q1 last year was the strongest quarter in Altemps history. Revenue came in at 681 million euros, down 1.3 versus last year. It would have been flat. Constance Exchange, the combination of organic growth and external growth, has erased over a year in terms of activity. The crisis that we have gone through and that is not over yet, France, Business is down 12.7%, 15.3% like for like outside France. Business is up 6.8%, but 5.6% on like for like. So overall, at constant scope, the decrease of activity for Alton this quarter comes in at... Minus 9.6. The activity rate has gradually improved but remains insufficient going from 96.6 in Q4 to 9.6. 88 in Q1. The trend remains positive from 87% in January. The activity rate grew to reach 88% in March and is coming close to the normative rate of 92.5 for Alton. Many countries or regions have returned to normative activity. rates are even higher. And the intercontracts in certain areas are surprising. Toulouse, for example, automotive in France and Germany in particular. The Use of part-time work has been reduced. It remains in France and Germany. It was 5% furlough schemes at group level at Q4. It was reduced to less than 3% in Q1 this year. And as I said, essentially in France and Germany, because it's still 6% in France and 12% in Germany. Headcount continued to decrease during the quarter. We were 33,800 employees. People, 29,400 engineers at the end of December 2020. Today, we're 37,150 at the end of March. 32,400 engineers and consultants on a par with March last year. We were 37,500 engineers. of which 32,700 engineers at that date, excluding acquisitions and disposal. Engineer headcount 30,180. That's a sequential improvement between December last year and March this year of 780 people, as follows, minus 129 in France, plus 909 outside France. If we now look at the situation by geography, as we usually do at the end of March in France, activity down 15.3 percent still penalized by automotive and civil aeronautics automotive 11.5 percent of revenue still down 35 percent and aerospace 20 percent of revenue france decreased by 35 percent other sectors are up for the most part the buoyant sector Energy, 16% of revenue, except for oil and gas. Pharmacy, 9%. Rail, naval, 8%. Defense and security, also 8% of revenue. In France, all these sectors are up by 10% or more. International, the situation has also markedly improved, even if some countries have too high bench rates. Outside France, activity is down 5.6%, whereas the decrease... was at 12.4% in Q4 last year. North America, particularly in the U.S., representing 80% of NORAM activity, is down by further 10%, minus 20% in Q4 last year because of auto, oil and gas and services. Canada, 20% of NORAM growth, It was 11% this quarter, thanks to the bank, insurance, tertiary sector, telecoms. In Canada, all sectors are up, save aerospace and energy, only representing 10% of Canadian revenue, both. In Germany, business is down by 24%. Unfortunately, a major decrease reflecting an improvement in this situation because it was significantly reduced. Q4, 20% was down 31%. Q3, down 34%. Let me say that the decrease or growth rates are comparable quarter on quarter insofar as activity dropped. In H2 last year, we don't benefit from a base effect that will become favorable as of Q2. The Q1 of 2020 was a very high quarter for Alton. Activity in Germany picked up slightly in automotive, however, It's still at minus 23. Sure, that's better than the minus 30 and 40 the last quarters of last year, but it's still insufficient. Aeronautic business has not picked up in Germany, unlike France, where we see a slight improvement. minus 50, a sector that only represents 18% of revenue. In Germany, the other main sector, finance, service, industry, up, life science. In Spain, activity down 5.6%, telecoms, service, and aerospace. It's up across all the other sectors. In Italy, activity continues to grow almost spectacularly. Growth hasn't weakened slightly in 2020 this year. Top 20% in Q1. All sectors are growing. Highest growth rates being automotive, plus 27%, representing 20% of revenue. Defense and space, plus 30%. 12% of Italian revenue, rail and life sciences. Scandinavia, a constant scope. Revenue is still down 15%. Finland, a quarter revenue of the area. Activities only down 5%. Industrial equipment almost back to normal. Sweden, three quarters. Activities improvement, even if it's still down 19%. It was minus 28 in Q4 because of auto and heavy trucks. A third of the sector, all the others, are Benelux, posting 3% growth activity. back to break even in Belgium where most sectors are growing, especially pharma. Netherlands activity grew 6% thanks to electronics and semiconductors. All sectors are growing. Asia, the scope sees a return to growth. Organic growth comes in at 15.5%. India represents 30% of APAC. China, 20%, delivered an increase of 16%, 17%. Japan, 15% growth above 25%. India grew thanks to electronic semiconductors, auto service. China, auto service. electronics and semiconductors too. UK business continues to recover even if the decrease 12% still impacted by the decrease in aero and auto but diversification in other sectors are growing strongly. Switzerland for the first time activity stabilizing down in the industry whereas all other sectors are growing. Life science and finance notably. Eastern Europe that we have added to the chart. It represents 2% of group revenue activity grew strongly in Poland, plus 40% thanks to financial services, ditto in Romania. To a lesser extent, activity is only up 10%. That's the review of the activity by geography. By sector, of activity as I do I'll give you the main trends in Q1 the change by sector Follows up from the H2 last year, auto and aero, lastingly impacted by the crisis, civil aeronautics, the others flat or growing. If we start with auto, 16% of revenue, now 23% slightly up because We were at minus 36% in Q3, minus 33% on Q4. At carmakers, the situation's mixed. Some are growing quite significantly, about 10%. CA or Ferrari, others growing. VW, others decreasing. Equipment suppliers, ditto, pretty mixed bag. rail, naval, 5% of revenue growth is still double digit. The outlook's good in both those sectors. Aerospace is down 38%. Activity stabilized at minus 50, Q3 and Q4 picked up slightly. Visibility is pretty low in civilian aerospace at Airbus. The Space subsector, 2.5% of the 10.5. Picked up as anticipated as of Q1, only down 5% versus 2020. Defense and security, 5.2% of revenue picked up. Activity grew 10%. Some accounts growing strongly. Energy. 11.5% of group is stable, but oil and gas at 5% is down 13% following additional budget cuts following the drop in oil prices. Nuclear just over 3% continues to grow by 11%. Energy equipment over 3% of revenue has growth rates topping 10%. Life sciences, almost 10% of revenue. Henceforth, growth also accelerated, 10.5%, thanks to the pharma sector, essentially. Medical equipment is stable. Other industries account for 6% of revenue, up 5% also after a decrease of 10% in 2020. Telecoms, 6% of revenue, slightly down, minus 4%. Primarily due to certain telcos, but the trends there vary considerably. All clients are up except for Orange at the start of the year and SFR Altis. That was already the case last year in significant proportions because they'd implemented their decision to re-internalize decisions that accelerated with the COVID crisis and continues to be rolled out the first quarter 2020.

Electronics, media, and e-commerce, 7% of revenue stable, resuming significant growth in spite of 80% drop in activity at Amadeus. Semiconductors and electronics activity made up the bulk of growth. Lastly, bank and finance stable, both in retail services and public services, and also bank assurance, varying by geography and by client. It can be quite a difference from one area to another. On to M&A activities for the quarter. We already announced first acquisition beginning of 2021. One of the companies we listed in the We have three acquisitions in 2021 in France and outside of France. In France, the first company in information systems has already announced 37 million euros in revenue, 280 employee consultants. In Germany, we acquired a company in automotive software with interesting clients. Their revenue is 10 million euros. We also bought a small company that's in consulting and agile trading to boost our footprint for a specialized subsidiary in the U.S. Their location is in the U.K. and Finland. Nine and a half million in revenue last year. All these companies will be consolidated on the 1 July 2021. The outlook for 2021 now. It's still early days to give you specifics. But usually, at any rate, we don't make major points in April regarding the whole year. And we can say that we haven't yet seen the end of the crisis. There are ups and downs as there are lockdowns and easing of lockdowns. But we can say that Working from home is doing well pretty much everywhere now. It's not a drag on deliveries. It can be sometimes down on commercial meetings. It's easier to conduct business in person than via Teams or Zoom. But as we've seen in the figures, activity all in all remains satisfactory. Organic growth would be fairly high with automotives and aeronautics. Unfortunately, though, here we're having to contend with two sectors that are hit structurally by the health crisis, and that will continue for another year or two, at least, in aeronautics, certainly. Resumption activity was somewhat stronger than we'd expected, to be frank, in the quarter, particularly in February and March. especially return to a 90% activity level. We hadn't expected that resumption that soon, since some geographies are still down at 80% and 88%. Unless the health crisis worsens again, we should resume organic growth by Q3 2021. Last year, someone asked a question that I couldn't answer today. I can say that, really, honestly speaking, Unlisting really took a substantial downturn between now and then. In spite of cuts and some seasonal projects, we should end of September be a positive year today for Alton group-wide. So there you go. I'll let the participants ask questions. I assume some people do have questions now. So we'll open it for Q&A now. Please, Norman, if you'd like to ask a question, please press star one. I'll tell you when you can ask your question, then you will unmute at that point. First question. You have the floor, sir. Hello, Bruno. I don't know if you can hear me. I've got three questions, actually. on automotive. Could you give us more specifics regarding Italy performing fairly well versus France and Germany? Ferrari and others apparently doing well. What about market share? Is there a change in market share or is it just that budgets are up? Second question. On furloughs, 2-3%. I'm wondering, do you think, as of Q3, that'll be a thing of the past? Last question. Growth margin. At the last call, you said there was no issue regarding consultants' wages. Is that still the context? Thank you. Answered questions in order. On automotive, Germany, a slight uptick in automotive. We've had various offers and consultations in Q1. It's not feeding into revenue yet, but still we're seeing somewhat of a recovery in the German automotive sector. projects relating to software, embedded software, and also projects having to do with the zero emissions vehicle. It won't come as a surprise to you. In France, a less clear-cut recovery in the auto sector, but it should really come into play in the second half, I think, especially in PSA and Renault's accounts. Now, Italy, I can't say if we're gaining market share or if budgets are up, but my feeling is we've got a truly excellent team, and we probably will be gaining market share. Budget's going up by 20%. I don't think that's happening against CIOs. I suspect there's another phenomenon. The vehicle maker's So we have to increase outsourcing, and there's a shift between external costs versus internal costs. And that's one explanation of the big uptick. Something we already emphasized last year, somewhat going against the trend that we're seeing among other carmakers. Now, Sweden, activities stabilized. Ford in the U.S. resuming growth. That's, of course, good news. Volkswagen, it varies from market to market, growing in some areas, such as Germany, northern Germany, and still seeing negative growth, and southern Germany. So those are the points around the main establishments. The UK, Shag, or Land Rover, big accounts as well. For the time being, There's a very, very soft uptick in activity. All the vehicle makers and equipment suppliers to a lesser degree are in the same situation. Quick transition towards all electric. Some makers today are shifting completely to hybrid electric. We have slots for vehicle deliveries. These vehicles work well in cities, but for longer distance travel, somewhat a different situation sometimes. So the right response has to be sound. We'll probably see an increased demand for projects in the upcoming months and years, months and years. We're less worried about automotive as opposed to aerospace. In aerospace, there has been a recovery, especially in France, not as much so in Germany. But this is going to be a lot slower than the recovery we're going to be seeing in automotive. Now onto furloughs. In France, in Toulouse, mainly, and also in Nantes, we still have projects. These are ex-Airbus projects. And intercontract positions that are difficult to We don't have as many intercontracts as we have previously, but still we do have people between contracts around 15%. There's the same thing about Southern Germany, Munich, and automotive. Our strategy, to the extent possible, is to try to push for transfers and mobility. For instance, currently projects in Paris and other business sectors, which very much may use the skills we have in Toulouse. Given on furloughs, being paid to stay at home and receiving an percentage of their pay is also difficult getting the transfer. As long as the furloughs exist, I mean, we may continue. we have skills that we're not able to always use, gradually furlough schemes will lessen and necessarily this turnaround, this situation will change. People will no longer have resources left to furlough schemes. And now in Germany, oh, sorry, last one in France, furlough, 6% currently, probably in Q3 would reach, go down to probably two to three percent, so divided by two, basically. Now, into Germany. More of a question mark, because this very much depends on the recovery in the automotive sector. Plus, the competition scheme is quite generous in Germany. We're hoping to divide by two, but it depends very much on how good the recovery is in the automotive sector. Lastly, gross margin. Answer your question. Yes. close margin is holding up, maintaining at the level it was last year and the previous year. There is no negative effect on the close margin fundamentals. Of course, this year has been different from previous times. Prices have held up broadly. There haven't been price cuts. even though there's some mixed effects in prices, varying consultant community in different sectors and so forth that's having an impact on financial cost prices. But client cost prices, the prices we negotiate with our major clients haven't changed. So our growth margin has continued to be protected, continues to be protected for the time being, mainly today. It depends very much on level between contract. I hope that answers your question. Yes, he did. Thank you very much.