Alten S.A.

Ladies and gentlemen, good morning and welcome to the Alton half year results. My name is Val and I shall be your moderator for today. Please note that this is being a recording. You will only be able to listen during the call, but you will be able to ask questions at the end. To do so, please record your question by typing star one. If you have any difficulties, type star nil and you will get put through to an operator. Let me now give the floor to Simon Azoulay, Chairman and Chief Executive. You have the floor, sir. Good morning, ladies and gentlemen, and thank you very much for joining us today for this online meeting. I believe this is the third or fourth time we're operating like this. We do hope that we'll be able to meet up in person soon. We're running a little late. My apologies. We were waiting for the last few people to connect. I believe we now have something like 150 or 200 people online. And thank you for joining. This presentation will cover the first half year of 2021. It will illustrate the post-COVID recovery, looking at numbers since March last year. The numbers seem to show that we've overcome this dip and should be very positive for the future. Let's now look at business for the revenue are €1.395 million, up 12.5% on last year. As we had said at the end of 2020, we had expected full recovery by June 2021. recovery from COVID, that is. And this has indeed been the case. And this is what the numbers I'll mention will show. Now, if you look at the breakdown in revenue, given the significant impact of the crisis on civilian aeronautical business, which haven't quite yet recovered and isn't back to the previous levels, and the impact on the automobile industry, France has been slightly more affected than other parts in the world. So our international business has in fact increased significantly more than business in France, for indeed in France our revenues are not quite yet back to what they were. So international business accounts for 63.8% of revenue, so almost two-thirds, and we can expect something similar for H2 and early 2022. Our growth for international revenue was 18.8% compared to plus 2.9% in France over H1. You also have here the breakdown here. showing you the organic growth. We have been able to secure growth by focusing on external growth. Let me just say that this actually wasn't the result of COVID-related policies. It was all launched back in 2019 when we started looking at our external growth. We were already adding on companies between 80 and 200 people in 2019. And we'd said that we would scale up to bolting on businesses with 200 to 500 staff. We weren't necessarily going to aim for companies with 1,000 or more members of staff. So we're still focusing on the second category, 200 to 500 people. As said in 2019, that has given the effect that is shown here. Just to give you a slight breakdown, Q1 was minus 20% and Q2 up 30%, so all in all, plus 12.5% over H1. And this sort of fall tells what we can expect. As concerns the operating profit on activity, the operating profit, we had said that we didn't have much visibility on what we could expect, and we had said that we expected that to be somewhere between 7%, 7.5% or 8%. depending on how optimistic we were. Indeed, we had a bit of a doubt on the way that revenues would pick up and the impact of SG&A. Indeed, we've kept everyone on board. We've even invested. We've taken into account the training time, and in fact, SG&A had gone up from 18% to 21%, 22%. We're now back down to somewhere around 19%. So the impact on earnings was actually not that bad. Secondly, we were looking at the occupation rate we really didn't think that we would experience such a dearth of engineers as we have seen, more so even than 2018-19. This is the effect of the significant investment and recovery plans for various governments across the world. In fact, demand is such that our occupation rates is greater than we have had for some time. So our challenge now is going to be hiring the right kind of people and more people while at the same time keeping wage increase in check. So all in all, our operational profit is up to 9.8%. up on 2019. As I said, the real challenge now is to make sure that we have strong organic growth. Nowadays, we have 38,500 employees, including 33,800 engineers. You have the headcount numbers here on the right of this slide for Before COVID, we were 32,550 engineers, down to 31,440 in June of last year, and to 29,400 in December. We were very low-key on hiring and suffered the impact of turnover, therefore, in December. But now, as I've said, we're back up to 33,800 engineers through our growth, external growth process. amongst other things. Move on to page five now. Just to give you an idea of how things have happened globally, continent by continent, looking at this by geography. As you can see, we have experienced a growth across the board. In North America, we've gone up from 1,800 to 2,000. In France, we've gone up In Europe, excluding France, we've gone up to 13,000 to 15,000. Asia from 4,000 to 5,000. Africa and Middle East from 800 to 1,000. The only place where the recovery was not successful was France. The fact is indeed that civilian aeronautical business hasn't recovered. And we're only just seeing the first few signs of recovery in the automobile industry. But it's taking time. Secondly, the offset, if you will, in terms of external growth has been mainly outside France. So you can see here the summary showing that all in all, we've gone up from 32,550 engineers to 33,800. Next slide, please. Page six. The purpose of this slide is to try and explain the difference we make or our understanding of the difference between engineering, so conception of design of products, industrial or otherwise, or software or services, whatever. So the design, which is our core business at Alton, So designing things to be sold on to customers, planes, trains, life sciences, defence systems, cars, hardware, whatever, telecoms, everything. So that's what we call the blue world at Alton. And on the other half of the slide, you can see the IT services needs that we have in-house. within the company so these are services that are not being sold to our customers but these are sort of internal services so in fact we're looking at two very different types of clients in the blue world we have technical divisions engineering and people who are really involved in the core business of their products and skills. They're not outsourcing this significantly. They are mainly wanting to preserve their skills and know-how. They're not going to outsource half of their plane, say, even though admittedly there's some hiring of contractors. And on the other side, you have the services that we sell for the in-house of our customers. So in the blue world, we basically come to top up the work being done by our customers. So a little outsourcing. And in the yellow world, we have We're working with IT divisions. You're looking at bank and financing, retail, HR systems or IT systems. So these are systems and products that are focused around and structured around softwares and hardwares that are not core business for the various companies, but in fact, look at operational across industries. And this is, again, very different from what you see on the left of the slide where you're really involved in the core business of the kind. So 77% of our services sold is in the engineering world and 23% in the IT services. for the benefit, the in-house benefit of the companies. We feel that there's still a growth potential. We can probably expect for more growth in IT services because we can work with IT divisions and see chief information officers and with all our services and skills I think I said this I have said this previously I'm not saying that Alten should become a computer services company but there's probably some more growth to be tapped into on data and our interface with IT divisions and CIOs. And as I said, engineering, there's a strong demand there.

Moving on to the next slide with the sector-by-sector breakdown of our business and how things have changed recently. It becomes no surprise to you that in defence, security and aerospace, we have seen a significant drop of the percentage of that business group-wide. This is not a drop in absolute numbers, but it is a drop in the percentage, so the weight within the overall company, seeing as other sectors performed much better over the same time period. This is, of course, related to civil aerospace, with defence and security still putting in solid performances. We have a lot of projects for defence systems, for cyber security systems especially, with some big prestigious clients in France, of course, as you're aware. But we also now have presence in these fields in countries outside of France. Civil Aerospace and its OEMs have seen a drop, a significant drop of 45% of their business at the lowest of the trough during COVID, so mid-2020, and we're still at minus 25%. We are starting to see some demand come in, but recovery is going to be slow. We're expecting that not to happen until 2023-24. At the top right of the slide, you can see land and ship transport. A road transport suffered a lot, but this was not directly imputable to COVID. This has been true since 2019, with the expectant position taken on new technologies, new projects, hybrid cars, electric cars, new mobility solutions, etc. We're now seeing significant demand in those fields, but we have clients who are so concerned and who are putting so much pressure on prices that the work and business is very different from what's happening in other sectors. Here we're looking at mixing core business activities with the OEMs, So in France, in Germany, in the US or in Italy or in Sweden. And this thing gets mixed in with a large part of offshore businesses, Romania, India, elsewhere to reduce research and development costs by 30%. This has all been very complex, but we've seen significant inroads in this area. We've got a new Indian presence and we also now have delivery capacity in India. that is starting to come online. In this sector, you have ships, cars and trains. Trains have had good performance with good new contracts leading to a lot of new demand. So unlike what I was saying with cars, this is very different for trains. And Naval has seen some Pre-engineering requests some things for the Australian market, especially for this type of consulting work, the pre-study consulting work. We're talking about about 70 people on Alton's side related to the current affairs that I'm sure you're well aware of, especially the Australian submarine issue. So it's important to split automotive from naval and rail. Coming back to telecoms and multimedia now, our business is slightly down, but again, not in absolute value. Again, this is in the percentage of overall business. We're maintaining our position without a particular presence in telecoms and multimedia, but we've been able to maintain our presence alongside telecoms operators. They're putting a lot of downward pressure on prices and requesting a lot of offshoring as well. But we haven't been able to push outside of Europe on telecoms and multimedia. It's something that we're looking to implement, however, to drive up that percentage share across the company in the telecoms and multimedia side. The final engineering sector is at the bottom right. This is energy and life sciences. As you know, six years ago, we decided to get into life sciences with big pharma groups, and we've seen significant progress in that regard. We were welcomed with open arms by the big operators, beyond, of course, COVID, which ended up accelerating demand, especially for quality in manufacturing processes for pharmaceuticals. But we'd already seen a lot of interest in 2017, 18 and 19. Today, we're looking at revenue that we'll come back to on the next slides, but significant revenue and a significant weight within the group's overall business, 25.8%. Thanks to nuclear and nuclear waste management, Alten is still doing well in that sector. And also with oil platforms, for which we've always had solid business in a way that is spread around the world geographically as well. Then we've got manufacturing designs for industrial equipment. We've got that in Germany and Northern Europe. a lot of CNC machine design and that kind of thing. The final sector that I wanted to show in the light of the previous slide, this is the yellow part of the slide. So IT services and finance that are putting in strong growth. This is something that we're leaning into as well on our side. Business intelligence, data, artificial intelligence, and infrastructure and cloud assets, we are able to offer a differentiating offering compared to our competitors. So that is the breakdown of our business on the Altin side. I'm not going to dwell too long on the following slides. And that is simply because I have summarized most of what is said as I went down sector by sector for the previous slide. So if we move on to slide eight, for example, you can see more information on the automotive industry, electrification, testing, batteries, mobility, automation of driving and the like. So nothing surprising there. And here we have the main trends. This isn't the past. This is all about the future. And we are. expecting a lot of growth in the coming months and halves. On slide nine, rail and naval. On the naval side of things, excluding Australian submarines, we're seeing positive growth and a lot of expectations for the coming halves as well. On slide 10, aeronautics and space. From our current position in civil aviation, we are expecting huge growth. We've got a lot of tenders coming down the pipeline. We have 25% to 30% of the revenue that dropped off in 2020 that is potentially going to be recovered in the coming two years. And things might go even faster than that. Things are moving faster than what we expected as well. So a lot of demand, strong bounce back. And the space business is doing well as well. Moving on to slide 11. Defence and security. This is a sector that put in good performance even during the COVID period and is continuing to do so as we move forward with cybersecurity and AI being in many people's minds. There's a lot of demand and this matches well Alton's position. We are well positioned to improve. position ourselves on some of the big tenders. For telecom and media, the implementation of 5G and all of the services related to Amadeus, these are all services that dragged us down heavily in 2020, but are starting to look much better for the coming halves. On slide 12, we have BFI, services, public sector, This is something that brings us into competition with ESNs but with the technical reputation of an engineering industrial firm as we are at Alten. Now Alten is never going to be the world's largest player in finance or retail but we do have all of the tools and the technical environments used by the IT systems. So once again, this is a strategic play on our end and the growth that we've seen is likely to continue. Finally, on slide 13, we come to energy. A lot of investment in gas infrastructure. The oil sector is holding strong, and nuclear, as you know, has always been very profitable for Alton. We don't have much of a presence in renewables. We don't have much demand on that front either, especially in continental Europe. We had been looking at Spain and northern Germany. We've been a little bit disappointed by that, but the rest of energy is doing well. We have the right skills. And then life sciences. I'm sure you can imagine all the potential there. It's up to us to deliver. Our strengths are not in pharma or biology because we have engineers. What we're good at is data, data management, clinical trial result management, and then the process quality for manufacturing in fields such as aerospace where we need a zero defect approach with full traceability. And that is why the big pharma groups are interested in what Alten is selling. So that was an overview of all of the sectors. We may be able to come back to them if you have any specific questions on these later on. On slide 14 you can see that there are three items I wanted to bring to your attention. The engineering market is experiencing significant upheaval. There are new players who've been circling for a while, but who have now committed over the last two years or so to get into engineering. They weren't able to break through. The big ESNs who are the new players, Cap, Accenture, hadn't been able to get a foothold. So they ended up buying companies like Altran or Umlaut, Umlaut is a French-German company with 5,000 employees working in telecoms and aeronautics, to buy their way in, so to speak, to the world of engineering. So they purchased credibility so that they could then leverage their understanding of software, BPO for big projects, multi-year projects, which is not necessarily what Alton does in India or elsewhere. We've got these staffing and temporary employment firms as well. No, I don't want to cast aspersions at their core business, but they're looking to upskill staffing and then service provision and then package services and then fourth is capex and industrialization and that's what alten doesn't do so the staffing and temporary employment firms are looking to move into that second phase of service provider in engineering so we've got adico and ranstad and we're starting to see other players come in in the us too For the time being, we haven't really run into them. We've heard about them, we know they're there, but we haven't actually come across the Randstad or C combo yet. That is to say, they haven't really weighed in against Alten or any other players similar to us. So that's the second type of player. Clients, for the time being, are concerned about the credibility of these duos. We also have Indian companies coming in and they're starting to jump into the American market. They speak the language. There's a chronic shortage of engineers over there. And the US as well as the UK a little bit as well tend to use staffing policies that are making the most use of the social framework and the employment framework, which is a little bit more lax than in Europe, which means a lot of Indians. And they're starting to look into Europe, big names like Infosys, Wipro, TCS, and there are others. And they're starting to buy up European companies. We believe that this will then lead them to offer our legacy clients to shift their engineering works to India. As I said, this is core business and we're not expecting huge offshoring. People have been talking about this for a decade already. People have been asking us whether everything is going to end up being done in India for cheap. We don't believe so. This is core business. There will be some offshoring. There will be some lower skilled tasks like technical documentation that may be done abroad in India and as we do as well. But we're not going to see 70% of engineering business being offshored anytime soon. For the coming five years, we're expecting to need 3000 or so Indian engineers to meet the demand in Europe. The US is a different kettle of fish. So we're not too worried there. We're still winning tenders. We're still able to follow through. And we're still winning in India. We have 4,600 people in India already. Soon we'll have many more. And these are people who can support us in meeting client demands. We've had double-digit EBIT for a long time, so a lot of people are interested in the sector. However, managing that kind of company is not easy, and these investment funds who ended up purchasing large companies, SBO and others, for the time being have not been able to prove any ability to generate an impactful player in the marketplace. That one that was managed by APAX ended up being purchased in turn. So these players are there, but they're not any cause for concern for us. And in fact, Alton believes they are an opportunity because Alton is remaining the only pure player in research and development and manufacturing process development. And on top of that, Alten is the only company with international presence. To be honest with you, there aren't many people like Alten opposite Alten, certainly not with the size and the balance sheet. People are negotiating, people are trying to put pressure on us. But Alton generally is shortlisted because of these reasons. People are fearful of the big ESNs because they want to keep control of their core businesses. Because if you go with Accenture Umlaut, they're already in the core business, so clients are very concerned about losing it. And we have all of the necessary assets still on slide 14. This is the fourth part. We have implemented and continue to implement, because this is a precondition for our business, we've been able to show our ability to work internationally and we have a bleeding edge technology, I think probably the best in Europe. I'm not saying this to pat myself on the back, but we have invested a lot. We have a well-oiled machine at this point to structure things as packages and to deliver those packages. We still need to improve the delivery centers. They're spread around the world. Each one has a different skill set and capacity. And our aim is to use these in a cross-cutting, multinational way. We still have... offerings and delivery centers that are very local with paris or toulouse or the like and we'd like to see the germans converge with the french and other convergences around the world so an international undertaking that will serve to strengthen the reputation and the marketing that we can do for our expertise centers so that international component is becoming key for us for alten And that is exactly what we're working on with XCOM and the management board. And we've been on this for the last three years or so. I mentioned this in the previous presentation, but now more than ever, we need to demonstrate our multinational ability. We've been able to win a number of important tenders recently, thanks to that skill set. These are multi-country tenders, and we've won out versus the large companies that I mentioned earlier. The final item... is the health of the balance sheet for Alten. We could purchase, if we wanted to, although we're not going to be doing it this way, we could purchase one billion worth in acquisitions. Our strategy at Alten, however, has always been to be ambitious, however conservative for mergers and acquisitions. We generally look at purchasing 2,000 to 3,000 engineers per annum, because it's not enough to just buy them. They also need to be properly integrated, and the acquisitions need to be properly integrated into the rest.

Now, moving to acquisitions, move on to page 15. Let me just remind you that in 2020, we had acquired 2,850 consultant engineers for revenues worth 240 million euros. And this has indeed helped significantly offset our losses over the COVID period. But we actually indeed added that to organic growth, as I mentioned earlier. So some organic growth and strong external growth. If you look at H1 2021, well, the results sort of mixed. Four acquisitions, 615 consultants. Some... 80 million euros of revenue. I'm not saying this is disappointing. We're looking at what already have. We have nimble methodology in the UK, for instance, engineering in Germany, a little bit in Romania, also France, data and digitalization and life sciences in the UK. So all of these are things we'd rather like. There are also quite a few deals large contracts that we... or large deals, rather, that we were hoping to close in H1. But in fact, it will be in H2. We already have the LOIs, but given COVID, etc., due diligence has really dragged on. So to close these deals... by the end of the year... It's taken a little more time. So they will be tallied in H2. And we should get a very interesting H2 M&A catch up. Looking at the variety and the size of these acquisitions. Last slide in this first part of our presentation. page 16 and that's the makeup of shareholder base you see that nothing has changed it's exactly the same as last year two years three years four years ago I have been asked about thresholds and me crossing the 5% threshold and In my name, I have 5% personally held, 10% in a holding company, but that 5% are shares for which the dividends are paid out into the accounts of foundations, so as a beneficiary, as usus fructus, and... Yes, this may lead to some tweaking, at least superficial tweaking of my holdings. But in fact, it really doesn't change much. These shares are handed over to foundations. So, so much for me. Let me now give the floor to Bruno, who'll tell you more about the figures. Thank you, Simon. Page 18 now, then. This is a slide that we often share with you, which shows, in fact, the break that COVID meant in the growth of the group as a whole. But you can see that H1 2021 has been a time for restoring this growth. You see that our projects have gone down in 2020. It's picking up in 2021. we had 29,400 engineers at the end of 2020, now 33,800 at the end of June, so that 4,400 additional engineers were half due to external growth, half due to organic growth. And this clearly illustrates our change in practice since the end of last year. The whole of the organic growth in terms of engineers was due to or was secured outside France over H1 as we've seen. So, in fact, the share of the international business is still increasing and should reach the two-thirds mark by the end of this year. If you look now at our... sales, our revenues and like for like and change in scope, etc. On page 19, you can see that our business has indeed picked up. The overall growth was or three quarters of that was in fact secured by acquisitions, which is the exact opposite of we had In the past, because we have focused up until now on organic growth. Now, organic growth was severely impacted by the Forex impact. If you look at France now, page 20, business is lower than what it is for the rest of the group. particularly because of the automobile and aeronautical business. But in June, we were near enough or back to near enough the usual levels of business. Automobile accounts for 12% of our business and went down 17% compared to the end of H1 2020 aerospace business. and civilian aeronautical accounts for 20% of our business in France and is down 13%. Other businesses such as energy, 7% of our sales, pharmaceutical, aeronautical and defence are up at least 10%. As you can see here, for the first time, For a long time, we have acquired enterprise services in France, something like 22 million, to secure our position in cybersecurity and cloud computing amongst others. As you can see also, we also purchased a number of smaller non-core business activities to the tune of 7 billion, a million, sorry. If you look at our international business, page 21, organic growth, we got back to organic growth earlier and more markedly. And as we'll see later on, the breakdown per geography is very varied. We had acquisitions that helped to boost development in a number of geographies or a number of business lines. And that accounts for three quarters of the overall growth of our international business. So international business is up almost 20% in one year, greatly due to our acquisitions. Page 22. As per usual, we're showing here the change in organic growth. A quarter after quarter or quarter half year after half year. And the purpose here is to show you the trends and how things are going. Now, contrary to what you might think, there's no significant change in H2. But in fact, it illustrates the way in which business is picking up in France and outside France. Q2 had been last year significantly impacted by a slowdown in business But what you can see here is we have a substantially greater business level in Q2 2021 as compared to the previous year. More so even than as what we had at the end of Q1. Now, if you look at the breakdown by geography, page 23. If you look at the last column, column you see the organic growth that like for like and you can see therefore that there's great diversity here in the annexes you'll find the quarterly changes here and that shows that there was a significant upswing in business in q2 across the world now if you look at the Most significant geographies for Alton in North America, so mainly U.S., 80% of our business. We're up 4% or so. We're back to pre-crisis levels, including in the automobile. There's still a significant slowdown in sales. oil and gas and telecoms. Now in semiconductors and life science amongst others, it has picked up significantly. Canada accounts for 20% of the area. Growth is sustained 20% up organically due to telecoms, banks and insurance and life sciences. Germany now. Always used to be a bit of a problem and it is sorting itself out slightly. We're still minus 9% organically due to automobile and aero that only accounts now for 19% of our business in Germany. However, in the automobile industry, things have picked up and resumed since Q1 2021. It is significantly growing, but it's still 10% below what it was before the crisis. The situation in civilian aeronautical is still 40% down in Germany compared to what it was at end of June 2020. But services industry now accounts for half of our business in Germany is up 10%. Growth is still strong in life sciences, even though it doesn't account for much of our business in Germany. Spain, business is up 3%. It was back to pre-crisis level at the end of Q1. Italy, growth is picking up almost 30% this half year. In fact, the crisis had barely impacted business in Italy. And there's strong growth across the board in automobile, defence and space and others. In Scandinavia... Things have picked up significantly. We're only down 2%. In Finland, we're up thanks to consumer goods. Sweden is 80% of our business in Scandinavia and is only down 5%. Automobile and heavy goods vehicles represent 35% of our business, but it's still below what it was at the beginning of 2020. Benelux up 6%. Belgium up 4.5%. Growth across the board, mainly in pharmaceutical. In the Netherlands, up 6.5% thanks to electronics and semiconductors. But general growth across the board. In Asia, the scope is up 20%. India accounts for 30% of our business, up 20%. China, 20% of our business is up 20%. And Japan? is up 16%. UK, the business is up 4% and is above pre-crisis levels. Energy and services have offset the downswing in automobile, although automobile is picking up. Switzerland was not very much impacted by the crisis and is now picking up, thanks to pharmaceutical mainly. Eastern Europe only account for 2% of our sales and has increased significantly, more than 50% in Poland, thanks to services, and more than 10% in Romania. So all in all, as you can see across the board internationally, very varied levels, but the overall increase is around 6%. Now, this has obviously an impact on the numbers and mainly on the operating income. In Q2, business increased more than we had expected and therefore helped restore operational margins for H1, which is back to what it was before the crisis. Operating income 137% up 82%. Business levels are back to normal. In June, it's actually above 93%. So what you need to see is that the basics of gross margin on prices and wages, as we've been saying since last year, have in fact been preserved and have improved in some places. The business mix geographically or by industry has changed. Auto and telecom now accounts for less of our business where the margins are slower, but life science and energy have gone up. There's also significant increase in data and a significant increase in Italy's population. where the margins are significant, accounting now for 7% of our revenue. So the gross margin is up back to what it was in 2019 and is up 3.4% compared to H1 2020. All in all, SG&A is lower than what it was last year, almost back to what it was in 2019. The research tax credit is back to what it was last year, more or less, and obviously COVID expenses have increased. Operational expenses account for some 6.1%. Operating costs has been impacted by payment in shares after a specific holding period now worth 4%. The actuarial devaluation is 7.2% but non-cash because it's related to an allocation of shares. Over the whole of the year it will be a bit more than twice that, but it won't have much of an impact in the all-in-all accounts for 2021. Non-recurring expenses relate to international restructuring earnouts or rather adjustments on earnouts worth €1.6 million. Operating profit, therefore, stands at €124 million, worth 8.9%. The tax rate is €33.7 million, so 26% for the whole group. It may well be lower at the year's end. Minority interests... were sold off last year and therefore there's no impact for 2021. And net income stands at 89.3 million euros, which is back at the normal level of 6.4% of revenue.

Page 25 now.

IFRS 16 effects. We're basically at like for like for financial income analysis. This is made up of the cost of debt, which is very low, minus 0.3 million euros. Forex results are slightly up because of the adjustments of the dollar versus the euro and also some financial expenses related to provisions and dotations. Overall financial income is pretty much stable for the first half of 2021. The net financial income from previous years, more than 12 million euros, came from the sale of minority stakes. On slide 26, you can see the breakdown of our income by region with different performances depending on whether you're in France, which suffered most from the crisis with the aerospace and naval businesses especially. So income lower than the group average with gross margins that improved, but only 2.6% up versus the previous year and still remains lower than what we had in 2019. No positive effects from GNA in France because France is paying for the corporate costs. G&A, of course, went down elsewhere. The research credit went down with ROA from 4.3% to 6.8%. Internationally, the profit ratio is up from 7.2% to 11.5% for the first half of 2021. So this is better than 2019. Business also bounced back faster than we expected, with business up to 90% in some countries and a mix that we explained business-wise and geographically-wise that is better for us outside of France. Internationally, all countries together, we're up 3.8%. which is better than 2019 with GNA that is purely operational, which is down 70 versus the previous year, which was particularly low in turn and therefore than 2019. To summarize in per region, Germany, which was down last year, is slightly back into the black for this year. Sweden has solved its inter-contract issues and is back to standard performance for operating profit between 7% and 9%. Benelux, Italy and the UK in double-digit for the first half of 2020 and significantly increased their operating margin in 2021. Spain is now back above 5%. North America was also able to get its operating margin back to around 10%. Asia is a region that was able to maintain its operating margins. Profitability also increased, but is still slightly under that 10% mark. If you take everything together, international put in solid performance, but it's going to need to reinvest in some places as early as the second half of 2021. Non-recurring profit is only in international for reasons that I explained. And you can see the breakdown of corporate tax. The tax rates in France remain higher than the international average. In France, we're at about 29%, whereas the international average is lower than 25%. We can now take a look at the balance sheet for Alton. The balance sheet is relatively unchanged. On the assets side, non-current Assets account for 45%, mainly goodwill. And rights of use for IFRS 16, about 90 million euros with equity and liabilities on the other side. Current assets, excluding treasury, 42% of the overall balance sheet, mainly with customer receivables, which account for more than 80% of that item. With organic growth significantly up, receivables have been up since December. €240 million increase there. Shareholders' equity still accounts for more than 50% of the overall side of the balance sheet. We're gearing at less than 12.7%. Cash position. 195 million euros at the end of the year, 163 million euros at the end of June 2021. On slide 28, you can see the breakdown of changes for free cash flow. Alton Group in the first half generated cash flow self-financing capacity of 171 million euros. Then you have adjustment for IFRS 16 effects The operational self-financing capacity, which is the only thing that should be considered because gross margin in the sense of IFRS 16 doesn't make much sense, that's 141.6 million euros, so 10% of revenue versus 71.4 in the first half of 2020. This doubles which is in line with operating profit. If you look at the FBA operational rate is similar to the operating margin for our business because it's not very capital intensive. We're also down about 20 million euros on other effects. This is due to too much paid out due to IFRS 16 in 2020 and also the use of deferred tax mechanisms. Working capital requirements is symmetrical to previous years and is up. It will be increasing this year because of the strong organic growth in the second quarter of the year, which increased our customer receivables and also an increase by two years of our DSO because of seasonal effects. Our DSO at the end of June 2021 is 80 days. This is, however, historically low for us at this period of the year. I think we were at 92 days DSO in December 2019 and 94 a year ago. Working capital requirement variation can be analysed as follows. An increase in the customer item due to organic growth at like-for-like DSO, €87 million. The increase in DSO to €88 million. And on the other side, you have an increase in supplier debt and social debt because we hired more for 25 million euros. And this leads us to the WCR variation between the end of December and the end of June. CapEx for Alten remain low. Lower than standard levels, which will be near 0.7% roughly, are free cash flow after taking into account the fictive leasing effect is 3.6% of revenue at €50.4 million. Variations in scope accounted for some €50 million this year, €8 million for earnouts and €42 million of acquisitions. A net, of course, of active cash flow. We're still at €1 per share for the dividend and flows related to financing for €2.3 million. These are just reassessment related to Forex for our holdings in foreign currencies. Net cash position, €162 million. million euros with gearing at under 7% as we mentioned. FYI, earnouts are provisioned in the accounts. 82.2 million euros at the end of June, 70 million of which for more than a year. All of these comments can be found on slide 31. On slide 29, we normally break down free cash flow with an analysis. As you know, there's a seasonal effect on our cash position. This slide this year serves another purpose because we saw a negative growth effect in 2020 and then a strong symmetrical bounce back in 2021. So we do have strong swings in WCR due to the organic growth. That's why there was a strong change in WCR because of the strong growth. But WCR is now down, which leads to negative organic growth. And then the two effects are illustrated on the TFT analysis over six months for the first semesters of 2020 and 2021 respectively. The point of this slide is also to explain that like for like with ROA at about 10%, our free cash flow with CapEx at 20% is recurring and regular at about 6% of revenue. On slide 30, you can see the financial impact of IFRS 16 on the balance sheet and on the income statement and the financing statement. You can see that it is Zero for the three taken together. We're not taking into account the rent fees on our net position for obvious reasons. However, that is €181 million at the end of June 2021, most of which is accounted for by real estate. On slide 32... Even if the automotive and civil aeronautic sectors remain impacted by the health crisis, the activity recovery in the second quarter is allowed to renew organic growth as soon as H1 2021, as it was expected at the end of the year. We've been able to restore faster than expected our profitability of our operations, thanks to maintaining the fundamentals in our gross margin throughout the crisis, an activity rate that has once again stabilized and SG&A was lower during the crisis our cash position is satisfactory four percent of revenue despite a strong increase in organic growth in the second quarter and our financial structure has been strengthened with a gearing ratio of minus 12.7 percent there you go all of this means that we are confident going into the future and i can give the floor back to simon to present our development strategy Thank you. I have just two slides for you to summarise everything that's been set up until now. This will serve to reassert our feelings for the company and what we think we're going to see in the second half of 2021 and going into 2022. This is slide 34 now. Despite the fact that COVID mainly affected the automotive and aeronautics industry, we believe that from today forward, these are strong growth and recovery opportunities more than anything else. These sectors now need to catch up and they are already contacting us to do that. We've also put in significant effort to diversify. As you saw in the slide that presented the breakdown by sector, we have quite a unique spread, and to my knowledge, no other group at this point can claim to have quite such a fine balance across its business sectors. That gives us security and also potential for Alton, and all sectors contributed to meeting strong demand and strong growth that we will see coming up as well. the impact of the international business is going to be significant, much more than for the French business, although we do have a strong bounce back of civil aviation in France, or at least expected, and revenue in France and internationally, well, the international component is likely to be more than two-thirds of overall revenue, if not this year, at least in 2022. Especially as, as I already said, The potential for external growth almost exclusively comes from our international holdings. We've already signed statements of intent. Moving on to slide 35. And to conclude, now more than ever, Alten wants to confirm, and this is significant because I say it, Every time, and it is important, we reaffirm our strategy beyond the international development, acquisitions, not acquisitions, organic growth, non-organic growth. Through all of that, we remain focused on our engineer culture. That means that there are businesses that we're simply not interested in. As you've seen, we divested a maintenance business. A client asked us to get involved with technicians. Now, what we do is engineering. We do engineering, research and development, design for equipment and for manufacturing processes. We're also good at data and network assets for information systems. We dabble in consulting, but it's not our core business. We do pre-assessments for industrial equipment and software, and everything that's downstream, which is handled by blue-collar workers and technicians. We did try to get into it a long time ago, back in 2006, 2007 and 2008, but we decided this wasn't for us and remained focused on our core engineering skills. Alton is a pure player, if not the only pure player in engineering across sectors and with international presence. Our position in the world over the last 30 years has a proven track record at this point. There are ups and downs. There are some things that we could have tried out but didn't, things that we tried out and didn't do so well in, so we remain focused on engineering. Secondly, our financial policy and our balance sheet management Maybe not conservative, but certainly healthy. We're very precise in the way we act. We never slash prices to garner market share. That annoys some of our clients. We bet on our people. And that has meant that we've been able to stay in the higher echelons of gross margins and profit. And we're not looking to branch out into any significant acquisitions. All of this means that we can do what I announced earlier, which is move into some companies larger than 500 employees. internationally in a way that will round out our critical mass potential. We want more than 3,000 people in each country. That is already the case in India, should soon be the case in China and in Germany as well. Our offshore capacity will be strengthened through these acquisitions as well with reasonable sized acquisitions. And now we have all of the cards in hand to conquer our targets in the market, and we're pretty confident in our ability to do so. Before COVID, I'd like to remind you that in 2019, we set our targets to have more than 42,000 engineers by the end of 2022. And today we can say that despite the horrible year that was 2020, we are going to well exceed that target by the end of 2022. I think that we may even cross that threshold by June 2022. There we go. On that note and on that final piece of information, I hope that we've been able to answer most of your questions. I would like to thank you for your attention and we are available to answer any further questions you may have.

Ladies and gentlemen, if you wish to ask a question, please press star 1. And please make sure that you are unmuted. And then you will be asked to put your question. Star 1. There are two questions already. The first one. It comes from Emmanuel Caron. Good morning. Can you hear me? Yes, we can. Thank you for giving me the floor. I have three questions, one on margins for H1. There have been fewer foreign travels, fewer marketing expenses. Can you tell us what kind of an impact that has had on the margin for H1, even though this may not be replicable. Then margin for H2, can you extrapolate from margin for H1? Might there not be some kind of speeding up of the process on SG&A, for instance? And last question, on hiring, There was significant hiring on H1. Is what's happening in September in line with your expectations? Maybe I can ask Bruno to address the question on margins first. Bruno speaking. Emmanuel, to answer your question on margins... There are a number of expenses and not just traveling and marketing expenses that have gone down because of the crisis, also restructuring that was postponed. The purpose, as we said, wasn't to stick to the target rates of SG&A during the crisis. We wanted to preserve SG&A. our staff and proportionally last year SG&A rates were higher than usual and with business picking up we will have to reinvest in restructuring so SG&A rates should remain stable notwithstanding the pickup in business indeed we're back to standards to normal but it will probably experience also an increase in expenditure. So in H2 or maybe Q1 next year, there might be a slight increase of SG&A, maybe 10 basis points or 20, but I don't think we should expect a leap up by 50 or 100 basis points. As for margin... Phase two, can we extrapolate from H1? Well, there will be contrary impacts, for instance, seasonality. There are actually more business days in H2, so margin is generally higher. Also, the average business rate will be much greater over H2 as over H1 because we'll be back to normal business and occupation levels. And conversely, there might be a slight increase in expenditure of SG&A because you have to restructure, recruit, and go back to normal, basically. So our margin over H2 should, all things considered, be above 10%. Right, as concerns hiring... We, as I said earlier, we didn't do what we had done in previous crisis, for instance, the Internet bubble in H1 2003 or the financial crisis where everything had been frozen. But in June, we really chose to hire and to leave our competition behind. In 2008 and 2015, H1 was actually great for Alton compared to our competitors. Now, if you look at the current situation, we're still all wearing face coverings. We have increased hiring in September, even though the occupation rate are still very good, are indeed very good. Recruiters are still... afraid of a new variant or having to manage, as was the case last year, great numbers of people between contracts in downtime. So we won't be and won't have been as good over 2021 as we would have wanted. Moreover, there's strong pressure on wages and a significant change in the mindset of our engineers, lots of them have grown used to working from home. Obviously, we can't make any promises. Admittedly, we're still above 35% of working from home, but this is all done with the agreement of our customers. We can't do anything without their agreement. They set the conditions and we have to adjust. Then there are obviously um psychological uh constraints for our managers and for our staff related to recovery so again we won't be as good on hiring as we could have expected but we are going uh full on and we'll have organic growth in france and elsewhere maybe we'll miss out on what 500 people more that we could have had from organic growth if we'd acted differently in july thank you for that lauren has the floor now yes thank you and good morning four questions from me On the breakdown between engineering and IT services, you said you'd like a 70-30 breakdown. Do we have any overlap in terms of your customer base? And is this something that Cap can, or similar to what Cap has said when they purchased Ultron or not? Or have we got two very different customer bases? Yes. Second question, our margins and your expectations in the two to three years ahead of now. We've seen a mix between France and international changing a bit, but is there as the cause to expect changes in the margin that have up until now around 10 percent? So P&L is picking up, is my third question, but for 2021-2022, what kind of activities or businesses would give a boost to growth without having to come back to the incremental increase of 2019? And last question on wage increases. I expect that... you're having preliminary talks with your clients for 2022. I expect that will include price hikes or discussions thereabout. And can you tell us maybe how things are going there? Answer. Well, thank you, Laurent, for all those questions. As concerns the engineering to IT services mix, In fact, there's very little overlap. Many companies who have bought out engineering business have kept it separate. Look, for instance, at an automobile manufacturer, a car manufacturer. They have, say, big business processes that have been external, outsourced with... IT businesses, outsourcing, CRM, accounting, etc. And they fund that out to SAP or Oracle or other CIM companies. And that has no purchase whatsoever on the design and R&D or manufacturing. Now, admittedly, we have... There are shared skills, which is what the CIM companies are trying to leverage, and that is software and hardware design. I mean, there's digital across the board nowadays. It doesn't matter whether you're doing R&D or human-to-machine interface or whatever. You always have these systems. And that's true whether you're looking at manufacturing, at conceiving and designing electric cars. You always get the same kind of expenditures in engineering and IT services. And it's not because you have the same skills that you actually have the business line. People who have these skills in banking and accounting can't necessarily apply these skills to HR or to onboarded software in a fighter jet, say, when working with TELUS. So I don't think there's really that... carryover or possibility of a carryover from IT services to engineering. Now, we have about 20% of our business in IT services, and I think that does show us that these worlds are very different. The consultants are very different. The wages are different. The hiring processes are different. The average age of consultants is different in engineering. The average age of consultants is 30 years. In IT, it's 34. Why? Well, because in IT services, you have consultants, business consultants, business analysts, people who have maybe established expertise. So this horizontal approach, this cross-cutting approach, is something I don't really believe. In IT services, you might get a little bit of support to manage, I don't know, logistics or supply chains in manufacturing, but that's basically the only area in which I can sense some kind of synergy. As for your second question, margins, two to three margins, I don't think we'll get to 10% or come back to 8%. I mean, the model is such that you can probably have 10% margins on on-shoring, so French engineers in France, German engineers in Germany. But the offshore model, so Indians from Infosys or wherever are doing it differently, you have sometimes 20, 25 points. But a local market outsourcing offshore 5 to 10 percent will mean that we can never get far beyond 10 or 11 percent you know and that means uh sgna under control full occupation etc and as far as i can tell no one's ever reached 11 or 12 percent now if you bolt onto that uh an Indian company that sells their services in the US, it might push this up to 13%, but clearly you have two very different kinds of business, onshore and offshore. I don't know if you're getting me here, but what I'm saying is that for as long as Alton doesn't have 20,000 Indians selling their services in the US, then We won't get that, and again, that's not our purpose or goal. And as long as that doesn't happen, our margin won't structurally change. So we will stay focused on 10% with acquisition that might drag the margin slightly down or slightly up. But generally speaking, we'll be very pleased if we can get double-digit margin across the board. And our competitors are at 6% to 8% because they're not quite as rigorous in managing their business. Now, on aeronautical things. Now, recovery. We have 1,500 people to catch up or to make up on. We've already got some 800 more than where we were at the very lowest, mainly for European aeronautics, so France and Germany mainly. We said that we wanted to make up for these numbers in two years, mainly on process manufacturing. But there are new projects, etc. And we're still with 60% of engineering that's old aircraft lines that we're upgrading to or that are being upgraded to the NEO design. So we're getting recounting business there This had been put on the back burner, but it will pick up. So I'd say, and that had already been expected in 2019, so 50% would be related to resumption of production levels and 50% on the changes related to new typologies or upscaling existing ranges. Your fourth question on wages, well, yes, that is something we have to be mindful of, because indeed, and we sort of experienced that in 2018-19, but maybe not quite as forcefully as now, but clearly, there's a strong demand, meaning that our engineers are being headhunted and sought after plus over the last few years quite a few clients have tried to offshore some of their business engineering schools have a bit of a marketing and image problem I hope we don't end up in the American system where in fact there won't be enough engineers and we have to outsource Germany has that kind of a problem but they have opened their borders to let many foreign engineers come to Germany and they are hired there. In France even the most prestigious schools include up to 30% of foreign students quite simply because we're not turning out enough French engineers and many engineers that then make career moves, going to consulting, organisational consultancy, etc. So not only are we not drawing in enough students, but we're actually losing some engineers in the longer run, people who move on to other professions. In some schools, they no longer... have any graduates who go into engineering. They seem to all be going into consultancy. Now, I don't know what the exact answer to that question is. What I can say is that up in the past, we have managed to manage some of these circumstances. What I can say is that Given our skills and the price we charge, we should be able to increase our engineers' wages. And over the whole year, we should push them up 2%, and that will have to pass through into prices. But as we've said, gross margins have actually been improved. But there is a little issue of concern, and that is the future and the intake of future engineers. Thank you. Thank you, Simon.

Thank you.

There are no further questions in the queue. I would like to remind our participants that if you would like to ask a question, you can do so by pressing star 1 on your handset. Thank you. In any case, even if we don't have any more questions, you know that Renaud and myself remain available to answer any questions that may come to you even outside the confines of this meeting. In any case, I would like to thank you for your presence, for your attention. It's great to have you all here, albeit remotely. And I hope that this is going to be followed up by good news in the coming months. Thank you very much, and we'll see you all soon. Thank you for participating in today's conference. You can now hang up your handset.