Alten S.A.

Welcome to the Alton Conference on our turnover for the fourth quarter 2022. I will now give the floor to Mr. Bruno Benoniel, Chief Executive Officer. You have the floor, Mr. Benoniel. Good evening, everyone. Thank you for taking part in our remote conference about 2022 business. As you have probably noticed in the figures that we published tonight, our growth is still rather significant in spite of a base effect that is difficult at the last quarter. France only represents 31% of the turnover of the group against 35% last year. Our turnover at the end of 2022 is thus at 3%. billion 781 million euros. So there's a 2% growth compared... 29% growth compared to last year. It was at 2 billion 500 thousand... 500 million. It has grown by 37% outside of France. So with the same scope, our activity has gone up by 17.7%. So plus... 12 in France and plus 20 outside of France. We acquired business this year, which represents a third of our growth, and we have an exchange rate which has increased this growth further by 2%. During the first quarter, our turnover was at 999.9 million, so slightly off 1 billion. So our growth is of 9.6% in France and 34.3% outside of France. So our turnover has gone up by 14.9% during the last quarter. So 9.6% in France and 17.6% outside of France. The business rates of the group is still quite high. 92.2% at the last quarter, which means 92.6% on average throughout the year, so slightly better than our normative rate, which is of 92%. Over 2022, the number of engineers have gone up by 10,350 people, 6,577 in organic, and 750 people in France, and 5,850 and 47 people outside of France. So about 3,700 of them came from outside of France. At the end of 2021, we had 42,300 employees. At the end of 2022, we have 54,100, including 47,500 engineers. So we have 1,100 in France and 36,400 outside of France. so per geographical area. Our activity has evolved in the following manner. In France, just like in most other geographical areas, the progression of our activity has still gone up, but more slowly compared to the last trimester. Nonetheless, in France, the growth of the automobile sector, which represents 14% of our turnover in France, has accelerated throughout the year, going from 2.16% to reach 9.5 percent. In France, the aviation sector has gone up by 27 percent and 42 percent outside, and other industries, 25 percent. The retail sector has gone up about 30 percent. In Europe, outside of France, our business is growing significantly by much more than 10 percent, as you've just seen, except for Switzerland. Our business resumed. In Germany, it was quite obvious. The automobile, the energy, and life sciences have gone up on average of about 30%. In Spain and Portugal, the growth of business is of 22%. All of the sectors in that area are strongly growing. tertiary sector, defense, finance, safety, security, and in Italy, so southern Europe as well, growth is still quite high at more than 25% for the third year in a row, with, just like for Spain and Portugal, all sectors going up, including finance, tertiary, automobile, defense, security, telecommunications. In the UK, still strong growth at 27%. It has only slightly decreased at the end of the year because of aviation, defense, security, tertiary sector. In Belgium, Luxembourg, and the Netherlands, we have 16% of growth, 60% of which comes from the Netherlands, and automobile, electronics, semiconductors, and energy are the sectors that are doing best. To the contrary, Belgium's growth is much slower of only 5%. In Scandinavia, the growth has rebounded after the third quarter at 9.6% for 2022, thanks to a strong growth in automobile and heavy load trucks. In Scandinavia, same effect as in France. This rebound took a little bit longer in the automobile sector. This is why the expression of needs and the activities changed in these sectors. in particular for heavy-load trucks. In Eastern Europe, the activity business is at 38 percent, so quite good as well, thanks to Poland that represents two-thirds of the area and has had a 50 percent growth in all of the different sectors. In Romania, a third of this geographical area, 20 percent growth, thanks to the automobile and energy sectors. Outside of Europe, Northern America, a significant part of the group's turnover now. Northern America, 18% growth. This growth has decelerated throughout the year because of the Bayes effect that was not favorable. Per country, U.S., 80% of our turnover, significant growth. Automobile, finance, aviation, telecommunications are in strong growth. Canada, the aviation and the banking sectors represent more than half of the turnover of the area and they have increased very significantly by more than 50%. In Mexico, just to let you know, it represents 2% of the area because they also work for the U.S. for the automobile sector, but we have an activity that is booming in this sector. for local clients. Most of them are Mexican branches of American companies. So in Asia Pacific, a 30% growth. China represents 36% of the Asia Pacific area. They've had a 30% growth thanks to the automobile sector mostly. India, 30% of the area. A growth of 40% thanks to the tertiary sector, semiconductors and automobiles. Two smaller countries, that are worth mentioning here. Japan, 9% of the area, growth of more than 20% thanks to the finance sector, semiconductors, and Korea, 8% of the area, 30% growth thanks to the automobile sector. So a strong growth in almost all of these geographical areas. In spite of this effect, this growth has continued to happen. And it's not slowed down. So most of the sectors are growing, even if the paces are different. So if we look at our main business sectors, the automobile sector, its share is at now 17.4%. It's gone up by 27%, which is a strong growth. All constructors combined, in particular the German one, except for Daimler and The same for OEMs. Strong progress in particular for our German branches. 2.6% of our turnover, this was impacted by Bombardier, which is reorganizing themselves. Airspace, 45% growth. This is, of course, because we have a rebound following the pandemic. This is driven by Airbus mostly, but also by OEMs for whom this recovery is even stronger because we have Rolls-Royce, Thales, Safran, et cetera, who are doing quite well. In the airspace industry, that represents about 2% of our turnover. The growth is of 10%. Now, let's have a look at defense, security, and naval business. So 5.5% of our turnover. They have a 14% increase thanks to the big clients of the sector, and we are developing our business quite significantly for them. Energy, 8.8% of our turnover. Slight increase, quite slow, for reasons that are specific to each subsector. Oil and gas has decreased. continued to go down to the rate of about 10%. This has been made even worse because of the situation in Russia during the first quarter. As a reminder, I think I had told you already, Russia represented 21 million turnover in 2021. So this is not so significant for the group, but we lost almost all of it in 2022. So the nuclear sector, 2.2% of our turnover, it's still growing by 5% in spite of the recruitment difficulties in that sector. We're still expecting a significant progress of the nuclear market in light of all the new reactor programs that are in the pipeline. We will know more about this in 2024 or at the end of 2023 maybe. We've not received any consultation regarding this so far. So energy equipment, 2.6% of our turnover. This has gone up by more than 22%. As for life sciences, the growth is of more than 10%, 9% rather, both in OEMs, in pharmacy and health care equipment. For industrial equipment, there's a growth of 8.5%, mostly driven by electronics and semiconductors. Lastly, if we look at the telecommunications sector, which represents 5.6% of our turnover, so it's a slower growth compared to the rest of the group. With business that is going down among some operators, there's a significant progress at some Foreign operators, not so much in France with our historical operators. We have a 20% growth among OEMs. The finance sector represents 10.4% of our turnover. There's a 16% growth in that sector, mostly in Northern America and Southern America. As for retail, e-commerce, and the public sector, 18% of our turnover is going up in a rather homogeneous manner by more than 18%. As you can see, apart from oil and gas, 96.5% of the group's business is growing. And for most of the sectors that we cover, so almost all of them, we have a strong growth of our business. So now, moving on to external growth. Alten bought eight companies in 2022. four of whom were acquired during the last quarter. They are the ones that I mentioned during the last conference we had in October. The SPA projects that were being negotiated at the time we closed the deals before the 31st of December, so we acquired since the end of October several companies, one in Romania, which is specialized in software development. They do IT consulting. They have 300 consultants, 130 of whom are external, 13 million of turnover. In the U.S., we acquired a company in product management, and we already have a PMO business locally, so we'll add on to that. So they have 65 to 70 consultants. They should have a turnover of 14 million viewers this year. But their specificity is that they intervene solely in the aviation sector. It's a sector that we were not present in the U.S. and it gives us a, we have a foot in the door now to develop in that field. In India, we bought a product engineering company, 300 consultants. They also have branches in the U.S. And then in Germany, We're not very present in the telecommunication sector, which is the reason why we bought a telco expert company. They develop 5G infrastructure, and they offer network strategy. So they have 290 consultants, 65 of whom are external, and 20 million euros of turnover. So we also finished the divestment of the CIPRAM group. We had announced it in September. as part of our activity of the month. The divestment was effective on the 30th of December. As a reminder, these companies that we sold, so the CIPRM group is made up of several companies in the US and in Europe, they had a business model that was quite far from our group's business model, so they were selling software services and providing advice. It's a profitable job, but it is not exactly the heart of our business. So we used the funds to reinvest them in 2023 probably in the U.S. as well in our core activities because we want to strengthen our engineering business. We're seeking companies, as usual, that have a technical back office in India and a front office in the U.S. For your information, the consolidated turnover of the CEPRAM group represented 147.1 million euros in 2022 and IFRS 15, 35.4 million euros in Europe. As you know, the price is not something that we disclose. Regarding 2023, it's too early to tell you about the growth we expect, so I'm not going to give you any precise guidance. We will know about this later throughout the year. We received the first consultations and call for tenders starting from the 10th or 15th of February. What I can say though is that the end of last year and the month of January are in line with what we observed in 2022. At the end of the year, as usual, we have quite a high number of resignations, just like for any end of quarter. So nothing more significant than what we observed in the past three years, maybe even slightly less than in the past. So the rate of business in January will be aligned with that of January 2022. The organic growth rate in 2021 and 2022 will not be replicated, but our business has nonetheless gone up. Our embarked growth is of about 7%. So unless we buck the trend in 2023, which is not what we expect in spite of the pessimism of some economists, Alten should have an organic growth which is over 7% in 2023. Well, we may not open the conference. If there are questions, I will be very happy to answer. Thank you.

Feel free to ask a question by dialing 01. So we have a question from Emmanuel Parole from Gilbert Dupont. You have the floor. Yes. Good evening, Bruno. Can you hear me? I have three questions. The first one is to know about the turnover for 2022, including all of the acquisitions and acquisitions and taking into account the transfers. And I have a comment about the embedded growth for 2022. So does it include the volumes and prices as well? And the third question is about regarding the second quarter margin. So you mentioned a 10.2, 10.5 percent margin. So it's kind of shrinking. because of the timeline and the pressure on the raw margin. So are you still on it? I mean, do you concur? I will not be able to answer specifically to your three questions, but I will try to be as accurate as possible still. So the integration of the activities, the full turnover, I can't really tell you anything about it because there were some acquisitions that were done over the year and for which the accounts have not been closed yet for the full year. And the turnover for the first quarter of 2022 that we have integrated over the year is not necessarily reliable. So I could give you, like, a range, I mean, a ballpark, but I can't really communicate this right now, communicate this information right now. Most of the companies that we acquire have management models and bookkeeping that are quite, well, a bit crafted, like it's a craftsman's work. And it can take three months to actually set up a number of tools, not necessarily ERPs, but management tools, and they need training. And then there is the consolidation period so that we can match the group standards. So the embedded growth for 2022, so it's only for the volume, not for prices. So I will explain how we calculate this embedded growth. So we look at the situation in December. So we look at the payroll for the last week of December. And so we include the resignations from December as being employees who have not resigned. And then just like we need to have some recovery, just like we had in June, July, to look at the resignations that took place. So we take the last week of December, we look at the payroll, and I'm thinking of the engineers here, but also subcontractors, external people, because there is an increasing number of them. And so that's something we've developed internationally. And even in France, I mean, for the younger generation, there is a different relation to work. And in the IT world, like some people would rather be subcontractors than full employees, for Alten, it's still like a low percentage of our staff. But still, that is a trend that we've observed. So we look at the payroll, engineer's payroll, external and internal. We look at the turnover. And then we transfer these information for 2023. And that allows for a lower average price. So the embedded growth includes the volume of activities for the end of 2022 and not the average rate for the full year. So the volume at the 31st of December. with the prices of December so the higher prices in 2022 are part of the embedded growth but to be very accurate the higher prices that don't necessarily take place on the 1st of January 2023 as they are under ongoing discussions we haven't made any forecast for prices so it's not part of the embedded growth so it's It accounts for 7%. If we have higher prices, it will be added to the 7%. As for the margins, I can't give you an answer for the second half. But I would like to give you some indication over the year. We will have a margin level for 2022 that will be very satisfying, actually. There will be, well, I don't remember the number you say, but it will be kind of the high number. What was the estimate exactly? Well, I can't recall, actually. I don't remember what you say exactly. For the first half, we had an 11% margin, if I'm not mistaken. I had 11.4%. But for the second half, you say between 10.2%, 10.5%. That's what I wrote, at least. Yes, exactly. So I don't have the final numbers yet. So we'll have a call on the turnover, on the margin. but it will be kind of the highest numbers. We'll be close to that at least. There are some decisions to make on the projects that took place during the year. I mean, there were many projects, but we will get closer to higher numbers and higher estimates. Thank you, Bruno. The next question is coming from Laurent Dorre. thank you and good evening Bruno I have several questions actually so there were three mergers and acquisitions so could you please tell us the additional payroll on the fourth quarter of 2022 the second thing well I understand that it's too early for prices, but can we have an estimate for the pay rise for 2023 versus 2022? So we're getting off to a good start. But in terms of visibility, is there any difference between sectors, and is there a sector that we need to be careful of? Well, I will first answer your last question in terms of visibility. So, if we look at all sectors one by one, and if we look at our growth, last year's growth, we can see that our growth differ from one sector to another. And it shows a certain trend. even though it's not as significant at the end of the year, but there's no disruption in none of the sectors. So there's no specific red flag. We can't say like automotive industry is slowing down or there were some trends in France, but it's only in France so we have like a strong increases in banking and finance for example but today there's no particular red flag so I'm not saying it's going to be the case for the whole year but during the first executive committee that is something that we've addressed there's no red flag, there's no showing of, no sign of a slowdown. In terms of recruitment policy, so the message that we convey to our teams is recruiting like we did in the past few months or just are you waiting for confirmation in February before actually stepping up recruitment? Well, there's no much change. Our teams can keep recruiting on their projects. We are looking at some backgrounds and some specific qualifications required by the market. We have what we call skill metrics. So we have this for engineers, for example. And when an engineer is matching the skill metrics, our teams can recruit them. even though there's no project. So we haven't changed our recruitment policy, which means that if there were to be a slowdown in our activities, we will adapt, we'll make the adjustments, but recruitment is decentralized, it's outsourced. So managers have in mind and have this objective of our contracts, 7-8% enter contracts, so we are striving, seeking this objective and so we, and from that we calculate the expected margins. So the adjustment is made kind of automatically And if there's any signal, the managers have to slow down our recruitment. So it's either they no longer recruit or they lower the recruitment activities or there are engineers that are during that trial period that can be dismissed. So it's kind of natural. way of functioning, because we have a very large group, so there is this decentralization and devotion of power. So there's not just one policy, but in terms of monitoring, we have at group level, so this inter-contract monitoring, so we know how many there are and where, in which areas, so where the the share of intercontractors going beyond 8 or 9%. So I don't know if I'm answering your question, but we haven't decided on stopping the recruitment because we still have recruitment needs, and recruitment is one of the main concerns of business managers. And we have recruited in the last quarter, I will give you the figures, In 2022, in organic acquisition, well, recruitment, there was just one company that was acquired in last quarter of 2022. That's a company that we bought in the first half, which is based in Australia, and there were 42 engineers. And the rest of them, it's 40 subcontractors. We have 1,158 people, 220 in France, and 938 outside of France. You've already had the payroll for the last quarter? No. So in terms of... I haven't done this in order to be in line with the turnover, I mean to be consistent with the turnover. So if we look at the turnover for the last quarter, the latest acquisitions in Germany and US and India, there was no consumption. So that would be for the first quarter or later? Let me check. The companies that we bought in India with the U.S. front office should be included on the 1st of January. I say should because it will depend on our team's capacity on integrating them with the relevant tools. Otherwise, it will be on the 1st of April. The company that we bought in the U.S., which is specialized in aeronautics. It's a spin-off, actually, that is specialized in civil and military aeronautics. So we took over the military aeronautics part, so they are making this spin-off. So it will be on the 1st of April. The Romanian company will do the same thing. The bookkeeping are in Word and Excel, so it will be only integrated from the 1st of April onward. And for the Dutch company, the German company, sorry, we've been talking for a while now, and we know the internal system thoroughly. So it will be dealt with by our team, and it will be integrated from the 1st of January 2023 onward. And so the company will be officially transferred, yes. And the last thing, what could you say about pay rise? Well, pay rise, well, I can't give you a clear answer, an accurate answer on that, because pay rise differ from one geographical area to another. Even within the EU, we won't have the same pay rise in all countries. And outside of Europe, we will have like 10% pay rise. Like for some geographical areas, it will be 15%, and we are negotiating 17% rise in prices. And in some geographical areas, it will be between 5% and 10%. it doesn't make sense to give the average pay rise today, given the diversity of the group. So we are looking at the development of the price-pay ratio to see if the raw margin is deteriorating or not. And that's not a piece of information that I have today. It's too early. I just do not have it. So there are some hypotheses that I'm looking at, currently looking at. But I find in STEAM that a look at the budget and forecast are usually very cautious. And when I say cautious is that they anticipate on pay rise and not on price rise. So we are... no longer in a situation where everyone was controlling everything, where everything was under control. In some environments, in some areas, there was no inflation. So the business models were very much controlled. But now that we have inflation and managers have to fight over prices with clients, even though there are several years commitment because some groups are actually asking for pay rise and are asking us some solidarity and to lower our prices and so, well, some people have accepted higher prices or will accept higher prices. We don't have the exact numbers and finance people have to have a cautious approach and at the same time it has to be business-wide has to be valid. And some people have made budget hypotheses with pay rise and with no price rise. So that's something that we can't use. It's not economically viable. So for the price pay ratio, I have no more information. I have no information. And hopefully I'll have more information in February. Thank you for your answer, Bruno. No problem, Lauren. The next question comes from Eric Matin from Societe Generale. You have the floor.

Hello, Bruno. Hello, Eric. I have several questions. The first one is on APAC. There is a slide to Slow down for Asia Pacific. I know what it is. Thank you. So you have a sequential decrease for the third and fourth quarter. I wondered if there was a specific reason for this, a project, a country in particular. And the second question was with regards to semiconductors. For consumers, for B2C, there are many disruptions. I know you said that there's no significant disruption, but do you think that this could have an impact on our business and of how much in our turnover? And the last question is regarding the M&A pipe for 2023. I know you've already done four, but at the beginning of 2023, is it? acceptable and what do you think can be done this year in terms of M&A so in the M&A indeed in the pipe we have six companies today based on Asia Pacific and Northern America and even in Europe, with sizes that are the usual one. There's only one that's above 1,000 people, 1,000 employees. So this due deal, so some of them will be signed, others won't. I cannot say the likelihood of all of them being signed or none of them. By the end of Q1 or S1, I might be able to tell you. The only thing I can tell you is that on the biggest one, it's a deal that is more significant and that is not exclusive, unlike all the others, which means that there's competition for this acquisition. We don't know who is in competition with us. We know that there's only one last competitor remaining in front of us, Well, if it's a hedge fund, we don't have the same criteria. So I don't know. They don't want to tell us. This is a company that you you had in your radar for a while or because in Germany, I know you've been discussing this acquisition for some time. So is it the same for this company or not? So we started discussing this in Q4 of 2022. But have you been hunting this company for a while? No. I'm telling you, we identified it during the second semester of 2022, and we started discussions with them during the last quarter. Okay, so that's brand new. Okay, I'm not sure I had... I wasn't sure I had understood. Okay. That's it for what's in the pipe. There are others that we're discussing, with whom we're discussing, but... I can tell you what's going to actually happen in 2023 or not, but today, to be precise, this is the number of companies that are in New Deal. So regarding semiconductors, what this represents at group level for now we have no nothing showing that there's a decrease in activity be it in Europe or in Asia things are working out so far it might slow down a little bit throughout the year but I don't have any red flag on that for now I will let you know with if Something happened, but so far it's not the case. It represents 2% of our turnover for semiconductors and all things electronics. It's not a major share of our turnover. That's what I can tell you about this. So we have clients that are doing well, so it's not so much a problem. And for Asia-Pacific... There's been a slight decline in Q3 and Q4, mostly in Japan and India for local business. There are comparison-based effects as well that need to be taken into account. It also depends on the business policy as well. There are areas where salaries are going up very significantly, and this is one of them. We also choose to protect our margins, so we try to increase prices as well. And there are places where it doesn't work, so sometimes we lose calls for tenders. But this does not mean... The number of leads has not gone down. We see that through CRM, but the number of deals that actually take place has gone down. But it's not only... It's the comparison effect that is not always very favorable in that area. So this explains the sequential decline. And one last question. You say that subcontractors are a small share of what we do. What is it? What's the figure? Between 7% and 8%. Okay, thank you. Bye. So, Nicolas David from WHF has a question. You have the floor. Yes, good evening, Bruno. I have several questions. First, regarding the cash collection at the end of the year, how did it work? How did it go? Did our clients pay on time? Another question, you mentioned that for automobile, there has been an acceleration throughout the year. Can you tell us what drove this increase Is it still ongoing and do you have visibility on the sector in 2023? And for Dymer, which is an active client, is it a little bit less proactive on some projects? And lastly, can we have a comment on Gerard Tapia and the resignations? Does this have consequences for top management? What can we expect to happen this year? So cash at the end of the year, you will see that our situation, regardless of the cash that comes from the transfer of some companies, we've done quite well. We cashed in a lot at the end of the year. I don't think that we We'll have the same level of DSOs as last year because we have clients in the industry always the same and always in the same sector that try to, that do not pay on time. But we ensure that we obtain most of our payments in due time. So we've had a rather better level of cash at the end of the year than we did in June. You'll see this when the figures are published in a few weeks. Regarding the automobile sector, there hasn't been so much of a slowdown. But in Sweden and in France, it took a little bit of time to, we had to, took a little bit of time to start. And mostly it's Stellantis France, more than at Renault. And in Sweden, it didn't bounce back yet. And from the third quarter, the activity, the business started again in Sweden. So at the end of June, there have been many more calls for tenders than in the previous month. And all three of our main clients in Sweden, so Volvo PowerTrain, Gili, which is Chinese, and Volvo Trucks, all simultaneously started investing again. which means that there's been an increase of activity in Scandinavia, even if it had already bounced back elsewhere. So these are significant accounts. So Renault in France, our local business bounced back at Renault as well. So we've had an increase in the number of projects managed in France compared to the ones that were managed offshore. So the overall increase in activity at Renault was significant. We were at less than 5% at the beginning of the year, and we've gone over 15%. So this also explains the boom in the automobile sector. It's not a general one, because every one is doing quite well since the end of the last year. It's really linked to this particular geography. Daimler, honestly... we're wandering. We're not in touch with competitors on this matter. They do R&D, probably, just like everybody else. They probably invest quite a lot of money. I don't think they do everything in-house. So it's either a matter of the number of subcontractors that remain low so they're not growing or they work with a few subcontractors for R&D and it seems that we're not one of them. There's no referencing procedure just like we have for Volkswagen for instance which was in the top three of our clients and we might not be good with that client actually. It's also something that we need to consider. We need to understand what is happening with them. Because when other clients were not working much, there was nothing to compare that situation to. They were not any different compared to the others. But now it's true that in particular in Germany, people are investing in And it seems as though Daimler is not. So, honestly, I don't know. But maybe we're not so good. For TPSN emphasis, maybe there would be, we can consider that it's the OEM that asked for Indian people to do the engineering. It's possible because we know the Indian market better and better and we have several targets. We acquired a company last year which is EGF and it works with direct offshore. This means that there are not the subcontractors of European companies. They directly target European or American client accounts with the front office which is for the most part made up of Indian people, and they bring projects back to India. This can indeed be part of the explanation, but I think that it's not the only explanation. I don't think that Daimler is subcontracting everything to India. It took them very long to accept that they could use subcontracting, whereas the French were quite ahead in that field. Because the Germans don't like to do that because of non-disclosure issues and not so much for matters of price. Then we started to develop offshore business with that client. It took a while to start. And it's not used as often. And this is part of the German culture. And I don't think that Daimler is any different. Thank you for this explanation. We need to keep an eye on this. I didn't answer your question on Gerald. He thought he would resign in two to three years. As you know, he arrived around the time when the group was created. He spent more than 30 years at the head of the group. He was the administrator, and he wanted to go to the U.S. about two to three years ago, and then an opportunity came up now, and it was not something that he could have planned, and he thought that maybe... This would be a last experience that would be very different compared to the experience he had at Alten. So he took it. And he's going to be at the head of an American company for two to three years. Okay. So it's a personal decision which takes place. earlier than he expected. He's leaving the group earlier than he thought. In terms of restructuring the scope that he was in charge of, so for the Asian people are now in touch with Simon directly. He was also in charge of the U.S. part. And for the engineering part, which is the most important one, They are now under a director which manages part of France and part of the UK. So there are synergies between these different areas. Eastern Europe is now under another director which manages part of the activity of Eastern Europe for defense. And he took over a company that Gerald was managing. as part of a transition and it will then be transferred to somebody else. We might also hire someone because we're looking for executive managers for obvious reasons, but the scope that Gerald was in charge of was historical in a way, which is often the case in groups and we won't have the same one, the exact same one in the future. So this does not create any major issues in terms of the smooth business of the group. It's very weird not to have him around. We had a board of directors earlier and it was weird not to have him. It's his choice and he wants to have fun and a different kind of fun for the last three years of his career and it is what it is well that's very clear thank you very much have a nice weekend nice evening thank you Gregory Ramirez from Brian Garnier you have the floor yes good evening Bruno the net staff hiring over the fourth quarter 858 is a figure that we hadn't seen for two years and I was wondering if this meant that we were back to business as usual in terms of the growth of headcount for growth recruitment or Is this linked to an increase in the number of people leaving and resigning more than you might have expected? And also, if you could clarify the engineering headcount, you've mentioned it several times. Does it exclude subcontractors and freelancers, or do we also need to add... sort of FTE for freelancers and subcontractors, which would mean that it's different to the commercial increase. So the engineering headcount that I tell you about is about the people internally. I never include freelancers because they're not employees. Now the grief policy has never been to have resource to freelancers in order to optimize the business rate or to vary costs because The margin we make on a project is higher if that project was carried out by employees rather than freelancers. And even if some of them are with us in the long run, we're not in charge of their career. They can obtain training if necessary but they're not a part of our training program. The message company that we bought in the UK has a lot of freelancers. And today we're trying to use as many people in-house as possible. And this share of freelancers was always proportional to the number of engineers. It was 5% were at 7 now, or 8. which means that when we measure our turnover of course when we measure the number of people resigning we take into account freelancers of course but we try to abide by this ratio that we set and since we don't intend to have 15% of freelancers or go down to 5% next year while in in the forecast for next year it doesn't have much of an impact I hope I answered your question with this but our headcount always only includes employees regarding recruitment now we have 1150 people during the fourth quarter this is slightly less than a year earlier This doesn't mean that we have more people leaving. Actually, the number of people leaving was lower during the last quarter of the year as a consequence of the increase in salaries that took place all throughout the year. So if we were to go back to business as usual in terms of recruitment, well, it all depends on our business. So it will depend on growth. It will depend on the additional growth that we managed to generate in 2023. So on top of embedded growth. And if we manage to win new deals.

Okay, that was very clear. Thank you, Bruno. You're welcome, Gregory. So the next question comes from Derek Marco from Société Générale. Sorry about that, Bruno. It's not that I want to prevent you from going on a weekend, but given the size of the group and its worldwide footprint and your exposure to North America and... and Asia Pacific as well. Do you think that when you've done the modeling for 2023, is it something, what do you see? Like, will we have this seasonality? What do you think about compared to 2022? Well, the model doesn't differ. I mean, Our model is not different in the US than in Asia Pacific region. And I would say that in our invoicing model, Because we need to draw a distinction between the invoicing model from the level of commitment for the management of invoicing. Even when we have a world package, clients would rather us sending an invoice for the whole month or for the time spent. So we are very sensitive about the number of hours we can send. bill. That's kind of the opposite today. We are not less in Europe and France. That's not the case as much in Europe and France because of the world package. Well, those that are built, well, there are some world packages and we don't build a work unit it's more like deliverables and so we can raise the impact of time spent and as we have limited fixed prices it actually doesn't have an impact on on the fact that we can remove this aspect of time spent. We have 1.5 office days less. In France, it's two days less, and it's the most important even though it's like 30% of the turnover. With a month of May, that would be, as we say, as we call the highway. Well, with remote working and, you know, the holidays, like people might not go back to work. That's what I've heard. So that may be the best time to actually pass the retirement law in France. And in countries in Asia Pacific region or in the U.S., do we have swings of office days in comparison to France? I mean, in France, the maximum is five days. Five days is a lot. Because 248, 253, that never happens in France. No, but you have 250, 251. The highest must be 253. Yeah, 254 once. For leap years. And for the U.S., next year we are losing 1.5 days. In Germany, it's two days of workday. And in north and south of Germany, they don't have the same calendar. It's the same in Spain. And in Scandinavia, we're losing two days. In Spain, we are losing one working day. And we're not. They already don't work much, and they will work even less next year. In Italy, we are losing 1.6 days. In Asia Pacific, one day. So on average, it's 1.5 overall. Okay, that's interesting. Thank you. You can now go on a weekend. I'm not in a rush, you know. I know, I know. But still, it's Friday. Okay. Thank you for your patience. Thank you. The next question will be in English.

So we have a question from Luis Lu from BNP Paribas exam.

Please go ahead. Hi, Bruno. Thanks for taking my question. Just a quick one on utilization and churn. What was it in Q4 as well as exiting December? Is it coming down? And secondly, what's your current offshore exposure? And going to 2023, what are your offshore ambitions? And finally, could you talk more about what you're seeing in the competitive landscape? Are you seeing high competitions from the large Indian players coming to Europe? And as far as staffing agencies such as ADECO? Thank you.

I will answer your question slowly into English to make the translation easier, but I can also give an answer directly in English if you want. I will give you an answer in French, and if it's not clear, I will answer in English. During the last quarter, we've had a turnover that has slightly improved compared to the rest of the year, which is A good sign. So that means the loyalty policy that we tried to implement are working, kind of working. I mean, as our turnover went up 30% and on the last quarter at the group level, we are at 27, 28%, which is kind of high. because we would rather have a staff turnover of about 22%, which is ideal if we look at our business model. But the current labor market context, and across the world, I mean, it's not just in Europe or U.S. or Asia Pacific. The labor market is kind of tense worldwide, and engineers... engineers are recruited everywhere and are poached. And as for offshore, we have about 5,000 engineers who are working for U.S. clients or European clients. So our objective is to develop offshore in two different ways. So either we get new projects, new projects that could be offshore for our current customers when obligations in terms of productivity or prices prevents us from doing that locally anyway. And in that case, in order to not lose the client and to not lose the project, and try to avoid some processes of, well, cannibalization, we can offer offshore projects. And so even though we don't have all of the required skills as we have locally in our delivery centers. And then we want to keep acquiring new companies in India and the US with a technical back office in India with several thousand people and a front office in the US. Because in our business, the US market for external R&D, outsourced R&D and IT, and including technical IT or technological IT, is very much driven by activities that are carried out in India. So will I have to develop offshore while acquiring new businesses? I can't give you any... specific objectives wouldn't be relevant. I mean, our engineers' objectives in shore and offshore are growing with new projects coming up, and we have to manage progressive ramp-up. We have doubled in size, actually, on offshore in a very limited time. And in terms of mergers and acquisitions, it depends on the opportunities that arise and it depends on prices as well because we are in a market where prices are higher than in Europe and it's an obstacle in terms of acquisitions because we can't have the companies that are 15 or 18 times the EBIT at Altena. And then that actually, that is in connection with the competition question where I have very few Indian players in Europe that are locally setting up to run European projects. So the question was asked earlier on the fact that Indian companies are seeking projects in Europe with a trade-based front office in the US. Well, it exists in the US, of course. In Europe, it exists as well, even though it's not significant. There are companies such as Wipro or Afrosys that have open offices in Europe, but we recruit very few Europeans there. And I don't think that they want to grow in Europe with European employees. That's not part of their business model. And I don't think it's part of their DNA either. For a very simple reason, they are not comfortable with the labor laws and the labor philosophy in the EU. So our competition mainly comes from the usual players on the market. We have very few information on what Ultron becomes within CAP, but they are still there on the field, but not particularly more or less. The ADECO that has acquired ACCA and then has merged the subsidiary with ACCA to make ACODIS, is not particularly more present than before and even slightly less actually if I'm listening to the business managers on the field. Same from Randstad, Ozi. So these players that are trying to get to the engineering market are not particularly successful to my knowledge. the competition landscape has kind of remained the same. And the fact that Artron was bought by CAP is more of an opportunity for Alten, which is de facto the only international leader that is independent from the sector. That is independent of the sector.

Super useful. Thank you.

Enjoy your weekend.

So we have another question from Aditya Badavadapu from Bank of America. Please go ahead.

Hi, Bruno. Thanks for taking my question. This is two from me. You mentioned that organic growth in 2023 should be at least 7%. Can you talk about maybe the assumptions there on the macro situation, you know, does that assume the macro situation gets much worse or is it more sort of a lighter recession? If you could talk about that. And then second question, I know it's probably a bit early to talk about the margin, but the second half of 2022, you know, you said you would probably end up around the top end of that 10.2, 10.5. How should we think about 23 in terms of the different moving paths? So, Should we expect margins maybe to normalize to that level of what you saw in the second half of 2022, or is this scope to maybe be a bit better? Another check for me.

So I will answer in French to your question. So with regard to organic growth, so as I said, the embedded growth, would be about 7% for 2023, which means that if we don't have an additional growth with new recruitment, new projects, well, automatically we should reach 7% in 2023. So, well, we don't buy this scenario, because we want to continue growth and we think that will get them higher growth than 7%. We can't give any guidance right now because we are in January, but hopefully 2023 will be a positive year, even though growth rates in 2021-22 will not be reached again in 2023. because of our recovery from COVID-19 and in the automotive industry and aeronautics that have contributed to this growth in 2021 and 22. And also because there is this base effect, the group has gone larger. the macro situation and the economy shouldn't be as favorable or conducive in 2023, even though we can't see any signs of that right now, to be fully transparent. And we're actually reading in the press articles that say that actually the economic slowdown that was expected could be temporary and could be just like a very slight little slowdown nothing major so if our clients have major projects um that will last for several years and that might slow down their investment pace uh we don't expect uh a decrease in 2023. That is not something that we've considered at a management level. Even the macroeconomics are deteriorating. And as for the margin, I say it's at 10.2, 10.5%. The second half of 2022, well, even though that's not the purpose of the meeting today, but we'll have the best range, the highest range of ballpark. And I will give you the figure in February. It won't be the exact figure, but it should be rather a high number.

Thanks, Bruno. I just wanted to follow up on 2023 margins. Again, I said it's too early, but, I mean, anything you can tell us on the factors impacting that for 23?

No, but today we can't. make any estimated forecast like a reliable forecast for 2023. But we've always said that 2021 and 2022 would be unusual in terms of margin for two reasons. First, because we have business activity rate that were higher than usual. The second thing, as Eric said, will have less working days in 2023 compared to 2022. So that will have an impact on growth and on margin. And the group is keeping up their efforts of restructuring and management and tools for HR management. We have to create specific branches for the trade management to address international clients and no longer by geographical areas. So that results in costs, and so that is being ramped up since 2021 and 22, and that will be more significant in 2023. So what we say is And it's not a guidance, right? It's too early for that. But what we've said repeatedly is that Alton's ambition is to have an activity operational margin of about 10% as a standard. I mean, 10, 10.2, 10.3. And if we're doing better, fine. but we'd rather invest in growth and development. And I don't think that the margins in 2021-22 will be identical. Well, we'll have similar margins in 2023. We'll be able to meet more accurately in February, even though it's still a forecast from the beginning of the year, but our objective is to be higher than 10% anyway.

Understood. Thanks a lot, Bruno.

Have a good weekend. So we have no further question in English.

Please dial 01 on your phone if you would like to ask a question. There are no more questions. So if there are no more questions, then I would like to thank you all for taking part in this video. And thank you for all your questions. I wish you a good weekend. The next conference will take place on the 23rd of February. It is going to be... at the Maison des Arts et Métiers near Place Viena in Paris in three weeks. So thank you all. Have a good weekend. Goodbye.

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