Alten S.A.

Welcome to the Alton conference on the turnover figures for the second half of 2022, giving the floor to Bruno Benoliel, who is the deputy CEO. Mr. Benoliel, you have the floor. Thank you. Hello, everyone. And thank you for your presence to this conference for the results of the second half of the first half of 22, excuse me, and you've received the press release, and I'm sure that you saw with the figures that the first half of 22 did not show any change in relation to the end of last year. For a year now, the operations have sustained growth in spite of macroeconomic risky environments and the war in Ukraine. Headquarter figures end of June 22 is at 1,825,000,000 euros, 31% plus compared to end of June 21. It was at 1,395,000,000. In France, the operations progressed by 36% and 32% outside of France. So with Constant Scope and Forex, operations progressed significantly, progressing by 19.8%. which is plus 14.5% in France and 22.5% outside of France. Acquisitions have contributed to 30% of overall growth for this semester and representing 30% of our turnover figures. The Forex effect contributed positively because of depreciation of Euro compared to most currencies. As of today, a little over 30% of turnover of the group is conducted outside of the Eurozone and international represents now plus 67% of operations of the group. At the second semester, our turnover figure is 931 million euros. This is a 30.74% increase compared to June 21. On a similar scope is 30% growth, 18.9% in France and 21.5% outside of France. The activity rate is still high. It was 92.9% at the second quarter, above our normative rate of 92%. The consequences for the second semester, the activity rate of the group is 92.7%. Logically, the turnover was also high. The two factors are usually connected. So activity rates that are high and turnovers that are high mean that the operations are doing very well. Our turnover rate is 28%. It is higher than what we would want it to be, of course, as you know, because our target turnover rate is 20% to 22%. However, the engineers have been increased by 6,500 people. including 940 organically, 430 in France, and 1,290 outside of France. Acquisitions represented 3,060 engineers. As a consequence, while Alton had 42,300 people at the end of last year, including 30,000 engineers, we are now 46,600 people, including 30,660 engineers, including 8,800 in France and 32,500 outside of France. Activities per geographic zone. Before we look at them per sector in France, our progression was mostly due to the civil aeronautics, representing a quarter of... sales figures in France increasing by 47% and now has gone beyond the level before crisis. Progression is due to nuclear and energy infrastructure representing altogether 10% of sales figures and growth above 20%. Automotive is 10% of sales figures only increasing by 6%. It was at zero at the first quarter, and so growth accelerated in the second quarter, but growth was conducted mostly with the falling back on nearshore and offshore projects for car manufacturers in France, which is still under the pre-COVID levels in France. In Europe outside of France, activities are undergoing growth, as you've seen in the slides that were distributed in most geographic zones, except for Scandinavia and Switzerland. In Iberia, our activities increasing by 23%. All sectors are undergoing strong growth, in particular civil aeronautics, civil services, industry, and telecom. In Germany, the picking up of activities that was seen at the first quarter was even more consistent than second quarter, and so increase of activities in Germany increasing by 22.3% organically, aeronautics. progressing by plus 30%, 16% of German sales figures, but still under the level that it was at the beginning of 21, while automotive, that represents practically half of sales figures in Germany, progressing by 32%, and has so really gone far beyond the pre-crisis levels. All other main activity sectors are also undergoing strong growth in Germany. In Italy, Growth is consistent at plus 26% for the third consecutive years, with all sectors growing without exception. At Benelux, growth confirmed acceleration seen at the end of 21 and the beginning of 22, reaching 17.1% at the end of June 22, thanks to the Netherlands, where the growth is practically at 60% and activities increasing strongly with electronic semiconductors increasing energy and industrial product lines, but Belgium growing much more slowly. In the UK, activity growing by 26%. This bounced back strongly in aeronautics, so growing by plus 100%, and representing a third of the sales figures, automotive increasing by plus 30%, 50% of sales figures, defense and electronics. In Scandinavia, Our growth had bounced back at the first quarter but slowed down in the second quarter to reach 5%. And going more strongly in more historic sectors such as rail and route transportation in Eastern Europe, there's a managerial issue, just like in Switzerland, which is linked to market and activity constraints. In Eastern Europe, progression is still strong with 40% thanks to Poland, increasing by 50% over all sectors, and Romania representing 40% of the zone, where you see that activities are increasing by plus 5% thanks to automotive and energy sectors. That was for Europe. Now moving on to Northern America in the USA plus 23% activities representing 40% of that zone. In Canada, so representing 20% growth is higher at 30% thanks to services and aeronautic sectors. In Asia Pacific, a growth rate that progressed again in the second quarter to reach over 40% for the first half. of the year in constant figures, China increasing by 30 percent thanks to automotive, India by 40 percent thanks to services, semiconductors and automotive, Japan 10 percent of the zone plus 50 percent, and finally Singapore that we didn't talk about very much but representing about 10 percent of Asia Pacific and growing by plus 60 percent thanks to finance, tertiary, so services and energy. growth that is as strong this half of the year in all geographic zones.

So if you analyze the activity now, if you take the different verticals, we can see that all the different sectors are growing, even though the rhythms of growth are a bit different. So the automotive sector is still bouncing back. It is now representing 17% of the turnover with an organic growth of about 30%. So it grows a bit more for the equipment part rather than for the manufacturing part. We have a bit of a lower activity for the Bombardier sector. For the aerospace, it's about a growth of over 55%, which is a great recovery, especially for the aeronautics. That is over 60% driven, especially thanks to Airbus. And the recovery for the OEM is rather good, especially for Thales and so on. So in the spatial sector, the growth is a bit more moderate, even though there is still growth at least. So for now, everything that we were missing in 2020 is back on. So for defense and security, we're at 5% of the turnover. The energy market is growing by 6% with different type of situation depending on whether, depending on the different provider. And then so for now we are getting out of Russia represented 21 percent of the turnover, so we're supposed to be going out of Russia by the end of 2022. So we should shrink when it comes to growth here. We also have a shortage in terms of engineers. So here energy is basically driven thanks to the energy that is growing by 20 percent, especially thanks to renewable energy. For life sciences, which represent 9% of our turnover, is growing by 10% in all sectors, whether it's pharmaceuticals or equipment. And for the other industries in the same sector, we have a growth of about 5.4%. For telecoms, we have a growth of over 3%. When it comes to Media and electronics, we have a growth of over 30%, especially thanks to the different activities for e-commerce or semiconductors, for example, and for tertiary services, which is 25% of the turnover. It is growing, especially in banks and insurance, with a growth of over 17%, especially in North America and South Europe. So to sum up, if you take out telecoms, the automotive and rail and naval industry, that represents less than 10% of the turnover, while Alten has about 90% of its activity that is made out of sectors in which we have a lot of growth. When it comes to external growth. We had acquired four companies on this first semester. Three companies were already announced in the previous publications. We've added one more company in Australia, specialized in project management. You can see this is a rather small company. And the idea here is to try and reinforce our presence in Australia. So we have a lot of different affairs upcoming in different countries such as Romania, India, Germany, the U.S., and so on. For 2022, I'm reading the presentation just as you are. So what I can tell you is that up to date, we don't see our activity slowing down. Maybe you'll say different things in September once we'll publish the results, but for now, we're doing quite good. So for the And automotive sector, we can see that we are above the level we've had pre-crisis. So it's much better than we had anticipated. The context has changed. And so organic growth for the second semester of 2022 will be much over 10%. So I'm now going to give the floor to the participants to this meeting. So if the moderator can now open the conference so that people can ask their question, that would be great. Thank you, ladies and gentlemen. If you wish to ask a question, please type 01 on your phone. So we have a question from . You now have the floor. Yes, hi, Bruno. I have a question regarding recruitment policy for the third trimester. So we can see that the demand is rather high, but the context is a bit uncertain here. So I wanted to know what it would be in terms of recruitment for the third trimester. And I was also wondering, for my second question, it's a bit more usual, but I had questions regarding the inflation. Is it going to impact the prices on the last goal? If I remember correctly, you said that it was going to take a little time to make sure that the inflation wouldn't have an impact on prices so you could compensate. So I wanted to have your opinion on that point. All right, so regarding the recruitment policy that we have for now, we haven't really thought about it. So for now, we're trying to maintain the turnover at a acceptable level. So we haven't noticed or observed any spike in people quitting. So the idea for now is to try and maintain that. We have the same number of offers. And so the idea here is to try and slow down the turnover, but to try and recruit more so that we can fulfill the needs that we have. So for now, we're not planning on slowing down the recruitment process, because that would put our activity in jeopardy. And if the situation is, if it's going to change. Of course, we'll change our strategy as well. But for now, we would have been able to do more in terms of growth if we would have been able to recruit more. Unfortunately, we haven't been able to recruit as much as we needed. So our growth was limited. And so now, if you want to answer to the different call for tenders that we've received, especially in the US, well, we see that the projects are not going to shrink either. So we are not going to change our recruitment strategy or recruitment process. When it comes to the inflation, well, unfortunately, this is increasing as well. So we've tried to anticipate as much as we could. So we're trying to anticipate wage raises. Usually we do this on the anniversary date of a contract, but we're trying to do the pay raise now so that we can try and compensate that inflation so we know that there will be increase in salaries here but the issue that we had is that we have major differences in between the different countries especially when we're acquiring companies from countries that usually have lower salaries so we are going to try and do our best to compensate but we're going to do this on a case-by-case basis So this year, the average salary is going to increase. Even though we've acquired company in countries that are still in developing countries at the moment. So here, we'll see that we'll have some stability or at least we'll see a decrease in the average salary. pay. But for the first time in a very long time you'll see that all salaries are going to increase for a while in order to compensate. So of course we've tried to make sure that these raising salaries will be impacting the different prices and tariffs. But apart from the automotive sector in France and the Airbus account in which the pricing is a bit more complicated we've been able to compensate two-thirds of the increase in salaries are being compensated thanks to the increase in our pricing for our different accounts. So what we can analyze here We can try and see the ratio in between the price and salaries that take all of these factors into consideration. And so we'll see that a bit more in the second semester, because we do have increased campaigns that we will implement. And the idea here is to get a better gross margin. It's really clear. Thank you very much. Thank you. We have a question from Gregory for . Hi, Bruno. I have a question regarding the fact that we are going to withdraw from Russia. You were talking of several millions of euros in terms of turnover in Russia. And so if we're withdrawing from that country and we'll finalize that if understood properly for the second semester, what should we expect? in terms of the impact it will have on the turnover. Is it only a couple million euros? Is it going to be really important? I imagine that this will also have an impact on 2023, right? Even though we know that turnover has already decreased. Well, we've already lost half of our activity in Russia for now compared to the first semester. And so, basically, we'll be completely withdrawn from Russia on the second semester of 2022. So, it won't really have an impact in terms of growth here. So, of course, if we take into consideration all of the different factors, we know that everything was already divided by two by the end of June. Okay. Well, thank you. Thank you. We have another question from Aditya Madhu for Bank of America. It's your turn. Look at the floor.

Hi, Bruno. This is Aditya from Bank of America. Thanks for taking my question. Two from me. You mentioned that second half of the year should exceed 10% organic growth. Can you maybe talk about some of the underlying assumptions within that? Is there any and any assumptions baked in around macro or what customers are saying. And second, given your comments on the wage inflation and price increases, I mean, should we still think about the full year margins as sort of being above the 10% or do you think maybe you have a bit more visibility on margins now compared to maybe a few months ago?