Alten S.A.

Results of the first quarter 2023. I'll hand over to Mr. Binoyel. Mr. Binoyel, you have the floor. Thank you. Good evening, everybody. Thanks for being present. So we're now going to talk about Q1 2023. I assume that you all received the release and I got it by email. So this was done in due form. As you may have seen, the growth was quite sustained despite two consecutive high growth years. And the year was quite buoyant and perhaps more outside of France. And the overall performance is quite satisfactory. Our turnover figure is 1.35.4 billion euros, increasing by 16% versus last year, 194.6 million euros last year. Our business is going up by 12.2% in France and 17.5% outside of France. 14.4% increase business on the life of libraries is 12.2% in France and 15.5% outside of France. Let me just remind you that we sold out a company in the United States last year, and actually growth of the group in euros is lower than it would have been if we had just actually kept the company. This is a truism, but still. And there is a difference, a relatively little difference between the company's growth on a like-for-like basis and the company's growth on an equal currency level. So... 30 percent so we contributed arguably to the total 30 30 growth and the forex uh negative impact is quite insignificant and the business rate was 91.7 percent in q1 and it is quite similar to the first quarters in 2018 and 2019 Now, you may remember, but last year, for example, in 2022, our business rates were beyond normative rates. And especially in Q1, we had some 92.5% business rate, our engineering Well, it went up by 2,500 people in 1762 in an organic group. In France in 1312, outside of France, acquisitions represented 96 engineers. If the Supreme actually transferred in 2022, I mean, on that basis, the group on the 1st of January, 53,650 people were working for the group, including 47,240 engineers. End of March, 56,300, including 49,500 engineers scattered the following way, 11,315 in France and 37,950 outside of France. Now, let's actually talk about our worldwide activities in France. Now, despite an unfavorable base effect, business went back up 12.2% as to 10% last year. And this rebound is due to the acceleration of the recovery in the second quarter in the automotive sector last year. 30% growth in France and security went up by 20%. And civil aeronautics keeps going up as well. And the dynamic is quite strong because we're going up by 35%. So this is a ballpark. I mean, a rough estimate. In Europe outside of France, global business is growing quite significantly, way beyond 10%, with the exception of Switzerland represents a very low or little contribution. In the Iberian Peninsula, the growth of business, well, it did not slow down at the beginning of the year. It's about 20%, and all sectors are now going up, and Germany's growth is driven by aeronautics. It went up after it did in France in 2022. It's about 30% growth in Germany. The automotive sector is also going up quite significantly. but actually slowed down, growth slowed down in the first quarter. The energy sector represents 5% to 6% of German turnover. It's also going up by 60%. So Germany displayed a good organic performance level. The aeronautic sector, for example, keeps going up. Well, the automotive growth rate is slightly slowing down in the U.K. Growth is still quite sustained, but also slowed down by 17% because of the civil aeronautics sector, which represents some percent of the U.K. business. And why? Because this is mostly due to one OEM in Italy. Growth is still above 25% and has been so for over 36 months. All of the sectors are going up in Italy quite significantly, most especially the financial sector, the automotive sector, defensive security, and telecommunication. In the Benelux, growth is 18% and also went up, actually sped up this quarter in the Netherlands with a very strong growth dynamic in the last two years, kept going up by over 20% thanks to the semiconductors and electronics. Belgium, which had a growth rate, much lower growth rate, Also went up by over 15% thanks to the recovery of pharmaceutical accounts. In Scandinavia, growth that had rebounded belatedly in the third quarter 2022, where it remained sustained over 12% thanks to the automotive and heavy duty sector. In Eastern Europe, growth is still sustained at 35%. which is about quite similar to last year's quarter. Over 40% in Poland and 65% in the zone. And Romania went up by about 30% in the treasury sector. Now, for example, let's leave Europe and let's go to North America. Now, the United States represent a lower contribution to turnover than last year. And then the United States Seventy-five percent of the region versus 82 last year, growth slowed down four percent on a like-for-like basis, C prime actually excluding C prime. Now, the United States slowed down for a very simple reason. We had to cope with the end of projects, oil and gas project terminations and oil and gas went down by over 20% in North America. Now, conversely, all of the other sectors in the automotive sector, service sector, the aeronautics sector, life sciences, that represent roughly 70% of turnover. in North America are going up quite significantly. In Canada, this represents about over 20% of the region in growth, up by 18% thanks to the aerospace and the banking sectors, and the performance in North America, which are probably quite disappointing, but actually when you think about it, it's relatively negatively impacted by oil and gas. In Asia Pacific, growth reached 7.6%. But as you may remember, it slowed down in the last quarter of 2022. China actually slowed down 7.5% because of telecommunications, which are slightly going up, and they represent about 30% of our business in China. India was behaving quite adequately, 30% in the region, 18% growth, thanks to local activities. Now, whereas Japan and Korea represented about 10% of the region, Growth of the respective is 40%, respectively. So you can see growth is quite sustained in all of the geographical areas. Slowed down in some places and went up in other places. But from a general standpoint, growth was still quite satisfactory and sustained in the first quarter of this year. Now, the business sectors, obviously, are all going up. I mean, the rates are different. The automotive sector is going up by 22%, and all of the manufacturers are going up particularly, including French manufacturers that went up, that have been going up since the first quarter of 2022, but growth has been going down among OEMs. The railroad sector, which was stable last year because of Alstom integration, went back up this year by over 10%. The aerospace sector is going up by over 30%. The defense and security sectors and naval services or sectors representing 6% of turnover went up by over 23%. Now, this is no surprise, this sector. will keep growing quite strongly. The energy sector, 7.6% of turnover, 4% to down. Well, given the oil and gas activities that are contracting, and now this business, oil and gas, which represented up to 9% of Altan's turnover, represents 2.3% of our businesses. 3.9% last year, and it went down by 30%. Why? Well, we had numerous major pluriannual projects, and some terminated. Some of those terminated in Africa, hence negative growth in the United States. We just talked about it. And the Gulf region and Russia withdrew last year because we terminated our activities at the end of the first semester, and As most of our activities in Russia were related to oil and gas activities, this is a withdrawal of 20 million euros in terms of turnover last year, and this business went down quite significantly as a result. Will it start off again? To be honest with you, we got no tangible signs here, so the company that is now positioned to those businesses We'll have to focus on other activities because it's got a good know-how in the deployment of teams throughout the world. Now, in other energy sectors, whether nuclear energy equipment and chemicals go up by 12%. The life sciences are going up by 6%. in the equipment as well as the pharmaceutical sectors. All of the industrial equipment and semiconductors is about 10% of turnover, going up by 15%. Telecommunications are also slightly going up at the group level among operators as well as OEMs. Now the financial sector, 9.5% of turnover, went up by 9%. And growth is lower, is weaker than last year. And we're now witnessing a slower growth this year in this sector. But this is quite heterogeneous because this is actually related to budget restrictions in France. Conversely, this sector kept going up in Southern Europe and Canada most especially. The retail business services and public sectors are still going up by over 10%. So as you can see, actually, with the exception of oil and gas, that represents less than 2.5% of turnover. All of the business sectors within the group kept going up quite significantly this quarter. And so far as external growth is concerned, Ad10 acquired a small company early this year, And software testing in North America, a turnover of $18 million, 185 consultants. We have numerous other projects. We also had an important project, which I had referred to in the last call. this company of several thousands of people scattered between India and the United States. And we were we reached the finals with others with one other contender. And we decided not to carry on after the New Deal for tax-related reasons, which, well, we believe the risks were just too high as far as that company was concerned. Today, we got other companies in mind. Some of the companies are located in Europe. Others are located in the United States. We started out with the discussions or a new deal processes, and I do harbor the hope that announcements will be made in so far as new acquisitions by the end of this quarter. In the second quarter, I'm sorry. Now, as far as 2023 is concerned... And so far as growth indicators, while the first quarter did not display any disruptions when it comes to 2022 trends, of course, our growth is slowing down in terms of pace and will keep slowing down because organic growth rates in 2021 and 2022, which I had already referred to, are not going to be reiterated. But from a general standpoint, the business is heading in the right direction and we're going to be clocking a two-figure growth rate in 2023, although this rate will be lower than last year's growth rate. So, we'll give you further information when the situation will be clear. Now, I'm done now with the first quarter related comments. If you can actually open up the conference for the participants to ask questions.

Ladies and gentlemen, if you would like to ask a question, please dial 50 on your phone and please give us your name before giving your question. I repeat, if you would like to ask a question, Please dial 50 followed by the hashtag if you have a question to ask. We have a first question. Hello Bruno, can you hear me? Frédéric, I have a question. the acquisitions in North America, something that is new for us. What does this amount to? Is it comparable to what Inno had done when they did an acquisition of a company in Germany that already did software testing? So that's my first question. The second one is on Q2. I know you gave the figures for January 2023 and the goal for March 2023. So could you do this quarter to quarter for France and international? So for the first quarter, we did 450 of the gross worth in France, and the rest was outside for a total of 1,300. So that's 100% organic, and 496 is integrating acquisitions. So we need to rebase the data on the 1st of January after the C prime. So 417,000, 47,240 consultants. So to answer the first question, yes, we do a bit of software testing. on all the domains for banking and services, but also in industry. So it's an activity that is part of our business. So we have a couple in France, a couple in Germany, a couple in Spain, Italy, et cetera. I wouldn't be able to tell you exactly how many we have in total, even though it's not the largest bulk of activity in services, but it strengthens our IT business in Canada and the United States where there is a demand, a strong demand for this type of business. because we've been seeing for the last years a steady growth in the demand. Would you say that it's more about bank services and tertiary sectors or industries? No, it's more to do with banks, services, tertiary, but also we do have some demand in the industry. And last question, a follow-up on the state of client demand. for the beginning of Q2, do you see indicators on the ongoing trend or maybe some weaknesses that we weren't able to see in Q1 that could show up in Q2? So how do you see this second quarter and do you So, but are you taking, are you being, so what's your stance on all of this? Are you showing a bit more reserve? Are you quite optimistic? Well, the recruitment, we haven't given any instructions on slowing down. but we obviously want to keep it under control. So the strong recruitment in Q1 is linked to the rebound that we saw. There's no... No indication was given on that regard. For the slowing down of the activity, as I showed you, automotive is slowing down in Germany, because that was an extraordinary growth in 2022. Aerospace is also slowing down. Banking in France slowed down. Telecoms, it is what it is. Oil and gas, we've talked about it. of this is let's say that there's not a general trend on a specific either on a specific country a specific sector sector so the business state is well oriented and for China you didn't mention You didn't saw it as a weak signal. Was it because something that you expected? Something that you expected? It wasn't expected there were big projects that were ongoing that were grinding to a halt regarding 5G. mostly in chassis nets which we acquired last year. There was a lot of interruptions, project grinding through holes. And this has consequences on a telco business in China. We knew that the project were going to stop. In the end, 5G, the main investment that had been done already, so we were expecting the portfolio of new projects, we were expecting it to be smaller than what was initially planned. Maybe not to that level, though. So that was the... Was that linked to... What was that linked to? I think it's linked to the fact that investments in 5G on the equipment side, I think that there's more to do, but I think most of it was done. And so... I think that the activity level of telco in China should decrease or maintain to the level it's currently at. We'll see what the future is made of, but when we talk with the people... When we do talk with... People in telecom, they kind of have the same, they see things in the same way. For OEMs, that's for sure. For operators, it might be different. Thank you very much. Hello, Bruno. I wanted to go back on net recruitments for Q1 that are very significant. Was it where you wanted to be, where you were aiming to be, or were you surprised by the change in activity levels, or is everything piloted in the way you want it? And this brings me to the second question. How did attrition change? Has it gone down already? Yes, attrition did go down. It's still high, but it's going down. Attention on salaries are still high. We can feel the context of the market. It has improved for our side at least, but it's far from fixed. For NETS recruitment for Alten, because attrition went down, the recruitments allowed us to generate to more engineers, which is what we were imagining. But we're a bit higher than what we were imagining for Q1. We weren't expecting the business to collapse for 2023. And so this echoes to the question that was asked before. Today, we're not putting out restrictive measures on recruitment. Recruitment is handled in real time by sourcing that are working with the business managers. Business managers pilot two things. First of all, their contract rate, because we can recruit, but if it's to have to go through and to contract, there's some profiles where we want to recruit because we have needs on the market but they do pilot this and depending on this rate the recruitment either compensates for the high turnover or or it can be here to answer the growing demand. So that's how it is for now. So the recruitment is adjusting permanently depending on our needs. And for the automotive industry in France in the past, There was issues with pricing with the clients. They weren't very exciting for us. With inflation, they were smarter and more comprehensive. And so this allowed us to move into this business and make it more interesting? Or is it still not ideal or low margins? In France especially, in the automotive sector, the margin is lower than average. So that's been the case since 2008-2009. Last year, in 2022, business uh the activity rebounded in the french automotive sector it wasn't very apparent in turnover because we were recovering from covid and for most projects not all of them but i'd say 60 to 70 percent of the project that did start uh in this period uh most of it was done offshore, so a great spike in Morocco, so it was partially outsourced. Then for the third quarter of 2022, I'm not going to go into too much detail, this is concerning our clients, but a couple of projects were launched For the first semester, Morocco did continuous growth. Most of the projects were done here in France. For the rates, there were increases For one of the two, we did get a price increase. It's not the case for anyone, but you need to keep in mind that for automotive, automotive model projects are sold as work package. We have price list per engineer categories. seniority level and then in France on top of that we have the training which is in the case on the international level and this is what allows us to build our pricing list and to build these working package offers But when we do operate in working packages, the client is going to come with their needs. We're going to build a team with maybe 10 people. This is some people from Morocco, India, etc. We're going to use these rates to... And so we use this to give a pricing for the client so we could don't do this person by person but while we're competing with others which happens all the time they also offer a price and if you want to win if you want to get the projects you need to have a product that is suited to the client's needs and it has to be competitive in regards to pricing. So when you have competitors where you see some that are bringing their prices further down, that's something I have to play with. So we're not on a B2C logic where we can raise the price because that's not how it works anymore for most of our business. So it's for us then to be smart enough to build something that makes sense and that is suitable to the client. If we increase our prices by 10% on a work package, we're pretty sure that there are going to be competitors that won't increase prices or maybe 2% or 3%. So it's not as mechanically simple as a revision of our process. Yes, it is. So there's no major impact on the gross margin. No major impact to be expected. We'll see at the end of the year how it's going to go. because there's going to be rate adjustments for the rest of the year, and we're going to see how the salaries are going to evolve. But I don't know what's going to happen for 2023. What's sure is that the job market is breathing again, And there are changes in salary requirements, but it is calming down. And precision on outlooks, you talked about the two-digit growth. Yes, it's organic, published. But I can't anticipate the acquisitions to come. So giving indications are what we're seeing today. So it always is organic. OK. Thank you very much. And congratulations for this fantastic quarter.

Bruno is my name. Actually, I had two little points to mention in so far as M&A. And given the macro developments, you have perhaps more numerous cases popping up and perhaps lesser pressure over the prices and the second element. And so far as oil and gas is concerned, and the contract deliveries, now engineers that are now reaching product termination dates, are they going to be actually remaining in the energy sector or redeployed in other sectors? And if so, which sectors? And so far as M&As are concerned, not only are there more vendor flows than last year or the year before, but prices right now are holding out against the situation pretty well, actually, quite consistent. And the deal we signed with a company that was quite big, a company, and the company was interestingly positioned. It was an Indo-American company. With a model representing 40 to 50% externalized R&D in the United States, this was acquired by the other finalist. He accepted to pay cash. But we accepted the price, to pay the price, including run out and on the basis of ambitious objectives. And the tax rate was amounting to tens of millions of euros. So we're somewhat gobsmacked. But that was a market reality. We could sign contracts whereby VDD could be done on retired people. And 15 times EBIT was the vendor's objective. Now, this gives you a good idea of the market today. There's a major paradox. The non-listed market is more expensive than the rated market. And whereas the credit situation is more difficult, but this has no impact on the prices. So the M&A, in so far as France is concerned, is as usual. Things have not changed versus the last two years. Now, let's talk about oil and gas. engineers that are working on those activities? Well, we got a few of them in France because there's little oil and gas business in France. What else is new? Most of them are working outside of France and they're working on work side equivalent contract. In other words, when projects terminate, either we got another project popping up or the contract just terminates. Okay. Okay. Thank you, Bruno. No problem. Good evening, Bruno. Laurent here on the phone. I got several items I'd like to talk to you about. The first one.