Alten S.A.

Good afternoon, everyone, and thank you for being here for this web conference on the activity at the end of March 2025. I assume you've all received the press release that was released a few minutes ago, and I hope you've had time to read it. For this quarter, we've started with the stabilization of the activity after several quarters of a slowdown in conditions that were slightly more buoyant given the drop in interest rates and the American elections. Some clients have decided to increase their prices. Since the beginning of January, end of March, the economic context has changed drastically. because of a lack of visibility both in the U.S. but also other regions in the world. Most clients have decided to defer their investment to new cancellation of coffer tenders or postponed projects because these clients are looking for increased productivity. As a consequence, the first quarters of the first quarter and the outlooks for the coming month are not as positive as anticipated in the first quarter 1.1 billion 6 million euros that is the revenue down 0.5% in France or outside of France it's down 2.8% and in France it's up 4.2% on a like for like the activity has declined by 5.5% it's down 3.8% in France

And outside of France, down 6.3%.

There was one less opening day than last year, which leads to a 1% decline in organic growth.

Organic degrowth is therefore 4.5%.

The activity rate for the first quarter was 91.2%. It was 91.5% for the 2024.

The flat market is actually quite satisfactory.

The headcount is 58,200, which is an increase compared to 5,700 at the end of December. 51,540 were engineers. 50,500 engineers at the end of 2004. Outside of France, 51,540 engineers. In France, we're 1,980.

And of course, this factors in the word group. And I'd like to like to thank you.

We're down 356 engineers on a like-for-like basis between the end of February and beginning of March. 151 in France, 205 out of France.

Now, if we look at the different geographies, the trend is actually very much in line with Q4.

It's actually just a little bit amplified. 3.8%.

2.8%. in economic impact.

There was a sanction because the automotive sector was down and telecommunications as well.

And banking as well. Aeronautics has remained flat.

Defense like science and technology have remained dynamic. In the Iberian region, the economy has continued to slow down. There is still satisfactory

7% growth.

All the sectors are up except for one, banking and finance. After several years, the activity is stabilizing but remains positive except for automotive and luxury sectors. But remains in growth. Germany, the decline of the activity is 18.3%. not as bad as what we've observed in 2024. And this shows that the market continues to decline, but is stabilizing at several quarters really down. The sector which accounts for half of the market is heavily impacted down 25% including manufacturers which accounts for two thirds so 25% down for manufacturers and OEMs down 50% because it's really complicated civil engineering has declined by 13% in the UK now The risk of decline is 8.3% and is stabilizing. The public sector, 45% of the market is still down 20%.

The automotive sector, which is 15% there, is down as well. And automotive, which is 18%, is ready.

is back to growth, 15% up.

In Benelux, it's stabilized.

In Belgium, 14.5% thanks to automotive and tertiary and life sciences. In Netherlands, down 14.5% because energy, high energy, tertiary, including ASML, that was stable. Eastern Europe, not as bad as 2.5%. Poland accounts for two-thirds of our sectors, almost 9%, thanks to the banking and finance sectors. Most of the other sectors were up, while Romania has gone down 15% because of automotive and tertiary sectors. Scandinavia, the slowdown in activity is 23%. the automotive sector in Sweden and Finland and automotive are heavily impacted.

In North America, the activity has gone down by 5%.

The USA, which is most of our activity, has gone down because of a life sign and tertiary decline.

They represent two-thirds of our area.

General Motors and Stenantis have postponed different projects. In Canada, 20% of the activity is still up 6%. In Mexico, we still see a growth 13%. Asia-Pacific now, the activity

down as well by 4.5%.

China is a very low growth, which accounts for one third of the area. Other sectors, they're growing, but very low growth, except for telecommunications, which is declining by 15%. India, which accounts for 30% of the area, is down 13% because of tertiary sector and others. Turkey, which accounts for 20% of the area, is back to growth.

especially thanks to the automotive sector.

Korea, 8% of the area is down because of the automotive sector.

Now, if we analyze the verticals,

The automotive sector is down 15%. Of course, the figures that I'm communicating always say it on a like-for-like basis.

And if we compare it by sector... If we check the sector...

spread out for 2024, you can see that it is very different because of world grid that has entered our scope.

So of course, we must not draw any conclusion from these figures.

because the scope has evolved, the scope has changed. The rate decreases by 15%, 10% among manufacturers that represent 80% of our turnover today, and 30% among manufacturers that represent 30%. For manufacturers, there are only two exceptions, and among German OEMs, It is the same. Airspace is now slightly declining because of space, which is declining by more than 20%, and civil aviation is about stable. It's no surprise defense, security, and naval businesses, which represent 8% of our turnover, are growing by 11.5%. Energy, 11.5% of our turnover, a growth of 4.6% thanks to nuclear energy that has had a 9% increase in oil and gas plus 7%. The equipment sector for energy remains stable. Life sciences declined by 5%, medical equipment minus 18%, whereas the pharmaceutical sector is stable. industrial equipment electronic and semiconductors represent about nine percent of our turnover is declining by four percent other industries declined by more than eight percent whereas that of electronics and semiconductors is stabilizing as for telecoms they're declining by eight percent this business has decreased by thirty percent among um oems but has increased by five percent among operators The decline rate of the finance sector continues to slow down at 3%, but the performances differ from one country to another. Most accounts outside of France are either now growing or they're stabilizing. As for retail and services, in the public sector, that was about 10% of our turnover. It has declined by 9%, mostly because of budget cuts in the public sector. To conclude, this first quarter, we thought it would confirm the stabilization of our business has confirmed areas that have improved, but overall, since March, business has continued to go down in some sectors and some areas. As for M&As, The carve-out process for WorldGrid was long and complex, and it was finished by end of September. The integration is going well. There's only one small business that represents 5 million years of turnover, is undergoing a social process. No other acquisition was carried out during the first quarter. And there are other modest, well, medium-sized projects that are being considered. As for 2025, the business has stabilized at the end of 2024. and first quarter, but the global context has generated uncertainty and lack of visibility. Several big groups in all geographies have adopted a new strategy where they are reporting their investment projects and there are even big call for tenders that have been cancelled because several clients do not know what the future holds and have thus decided to postpone their consultations. We thus think that there will be a 6% decrease of our business during the first quarter and we don't have enough visibility to assess the changes in evolution during the second quarter. The decrease in business will have an impact on the operating margin of the first quarter because of a big difference in the number of days between Q1 and Q2. The margin will thus be much lower.

That's it.

I'm going to give you the floor as usual. I'm going to ask Jonathan and our operators to open up the conference so that the people who have questions can ask them.

There's one person who has raised their hand to ask a question.

Can you please tell us your name because If you're on your mobile you cannot see it. Good morning, thank you Bruno for your call. I have one question regarding operating margins. Do you have indications with regards to the building blocks that would allow Alten to remain in our historical range between nine and ten percent for 2024 or do you consider that in light of the pressure on the top line it's possible for you to be below that margin now i'm only going to talk about the q1 margin because we don't have any visibility on the second quarter even if we have adjustments, measures that have been taken for the cost of investments like any other companies. Just as a reminder, last year, Alten's margin was 9.1% throughout the whole year, but with only 8.4% for Q1, because there's less of a difference between H1 and H2. Today, if we look at the 8.4% difference. There are two mechanical effects because there's 1.4 business days less. This will represent about 0.6 to 0.7% less in terms of margins. This does not reflect a structural evolution of our margins, but rather a contextual one. We'll see if in 2026 the calendar is more favorable. We've not checked yet. We have a little bit more intercontract that might have an impact of 15 to 20 basis points on the margins. And then we have a decrease of the top line, which mechanically contributes less to the margins and to the SG&A ratios. So I will let you calculate. But of course, margins will be lower than last year.

We should not see it as a structural decrease in growth.

We still consider that it's around 10%, but we won't get there this year. We didn't reach that level last year either. We now have a question of Aditya from Aditya Budavarapi. You have the floor.

Hey Bruno, this is Aditya from America. I hope you can hear me clearly. A couple of questions from my side. Thank you. A couple of questions from my side. So you mentioned that several customers have postponed projects. Can you maybe just give some color on which and markets you're seeing those postponements? And also, do you think that's temporary or do you think those projects could come back quickly if you start to see a bit more clarity on tariffs?

All markets, European but also US markets, have been hit by the decision taken by customers to freeze some projects which were about to be launched and also to freeze some bids which were about to be released. So we don't have precise information from customers because they say they don't have any visibility on what's going on in the future. So they cannot decide where and how they will launch big new projects. We think that it will not last that much, but obviously industrial companies need to know what has to be their strategy for investment. So I cannot answer your question whether it's temporary or not. Those projects will be launched anyway, and many have been delayed for one year, almost two years because As you know, the end of 23 and 24 have been weak years in terms of business. I mean, we saw a decline over, I would say, the last three semesters. But when we asked customers, for example, we had two big projects which were present in the U.S. at GM and Stellantis. When we ask, when do you plan to relaunch the project? We have no answer. And same in Europe. And we don't know what's going to happen within the life science activities because, as you know, today that business is doing quite well, I would say, in that environment. But many budgets are depending upon federal agencies in the US So for example, we have customers waiting for those subsidies in order to be able to go ahead with existing projects which are in place today. So it's a very strange situation where due to that situation, customers are completely lost and they don't know how they have to behave for the coming months. I don't think it will last too much because what we see is that at the end, probably US and other areas will come to some agreement because it's important to know the rules before Our customers can play, and we depend on our customers and our investment strategy. But as they do not know the rule, today they have decided to postpone as much as they can.

Understood. Thank you, Ronald. And the second question, you mentioned that telecom was down quite sharply, especially amongst the OEMs. Could you just explain? maybe expand on why those customers are down so much in Q1?

I'm sorry, you mean you're talking about OEM within the auto sector?

No, sorry, OEM within the telecommunication sector.

Ah, well, our main customers within the telco sector are Nokia and Ericsson. Okay.

Okay, got it. And then maybe Chris, talk about what your plans are on hiring in this environment, given the lack of visibility.

The hiring activity is very cautious. I mean, we don't hire people if we don't need them on project. This is the reason why, as you can see in the numbers, our staff or engineers has declined, end of Q1. The staff turnover remains above 20%, so we let people go and we tightly manage the bank in order just to get on board the people we need. So we still hire people because we need to replace some of the people leaving the company. We can also recruit some specific skills for some projects, for sure. But we don't have a precise plan in terms of how many people we plan to hire, for example, for 2.2 or for 2.3, because we adapt permanently, I would say, in real time, the hiring activity to the ongoing business.

Okay, understood.

Thank you, Bruno. We now have a question from Nicolas David.

One question from Nicolas David over to you.

Good evening, Bruno.

Hello, Bruno.

I have a few questions. The first one is,

I have a few questions. The first one about the slowdown that we've seen in March, especially across different geographies. It seemed to be quite general, but you've talked about different sectors, life science and automotive mainly, that were impacted.

And on the flip side, are there sectors

That could be a positive surprise in the coming quarters. I'm thinking about the public sectors in Europe, for instance, banking, nuclear, even defense, on our defense exposure. So this is my first question, and then I'll have another one.

Well, there are two sectors that performed well.

Quite well.

Obviously, defense up 11%. The activity is doing quite well.

And energy, for the first time, the oil and gas investments have restarted, including in the U.S. and a little bit in Europe as well. Then we have sectors that are around zero, railway minus one, aerospace and civil aeronautics per se, zero plus, banking, finance, zero or less. But for the public sector, we still see A decline down 10%. Our positioning is quite low in the public sector per se within Alten because it only represents 4% of our revenue.

So it's not much. And it's especially mainly in the UK and Spain.

So I don't think that this is very representative But in the UK, if we listen to the Prime Minister's statements, it doesn't seem as if they're going to invest in the public sector. Now, what could happen in the future? We don't really know.

What are the sectors that are going to recover railway? Probably because there are large projects. Life science was slightly above minus four.

But this is because of the American administration decisions, probably. And I get a lot of warnings on life science, even though we're not seeing it. happened yet, but there was a huge call for tender that was cancelled. I can't give you the name of the client, but it was actually cancelled the day before they were going to allocate the market. Aeronautics, for now, as you may have seen, this is announced. The launch of the A320neo in 2028. They're starting their research. They should finalize it by 2040, 2050. There will be architecture work before, but we won't see that in 2025 or 2026. Won't be before a few years. So I think that the economy simply wants to recover because we've had three quarters of slowdown and at one point or another, our clients have seen previous slowdown cycles And even when there's a lack of visibility, people will start to invest anyway because they don't want to take any risks.

As of today, to be clear, when we talk to our clients, they tell us that it's really blurry.

There's one sector where you have a lot of strategic challenges, which is the automotive sector, where Our positioning in the automotive sector is very European-oriented, even though we're present in the US. But even in the US, there were quite a lot of projects. Now, the question is, how is the automotive European sector going to adapt to this new situation? I know that there were projects that were stopped, not only because of the tariffs, bring to significant increase but also because behind that in terms of the technology there are strategic issues I don't know if you've looked at the news but there are technological advances, progresses made in the electric cars and a lot of Car manufacturers in Europe are wondering how to catch up. They're running after a technology that is already owned by the Chinese. Probably the investment strategies are going to be redefined for the European manufacturers because they're going to try and catch up. And for now, these players are not even wondering about

investing more in R&D.

They're already thinking about something else, about the strategy itself. Look at what Volkswagen is doing. I can't give you too much detail, but just take a look. Things are complicated. And actually,

As a consequence, the development of our automotive activities in China with European groups that have presence in China won't offset the decline in activity in Europe.

because not only is there a technological deficit that they need to solve, if you compare European manufacturers to the Chinese, which is also the case in the US as well, and then there's the economic side of things, because production costs and design costs are different in Europe, the US, than compared to China.

This is very clear, thank you.

There's another question. In organic, the headcounts are down and for embedded growth calculated at the end of March, it doesn't seem as brutal as what is expected in Q2. So I assume there will still be a headcount drop in Q2. I guess intercontract will increase. Or are there price impacts? Here, price effects, which is why Q2 may be potentially in the embedded decline. Well, we had a 3.5 embedded growth at the beginning of the year. Embedded decline, rather. If you add the opening day for the quarter, that's 4.5. But the organic decline, embedded decline, is 3.5. So for the first half of the year, we should probably reach down 6%. We'll be down 6%. So that means that the second part of the quarter will be probably worse than the beginning of the quarter. But these are forecasts. We're trying to be as objective as possible. But of course, there's uncertainty here. This is a result of an embedded situation at the beginning of Q2. So we've taken into account this embedded decline in the previous months.

And there is an evolution in the mix with activities that are more and more transferred offshore.

But in the automotive sector, for instance, including in Germany, you have a lot of projects now that are transferred to India.

And that accompanies this movement towards the Netherlands.

Is this something that you're also supporting, the move towards India? Sure, yes, absolutely. Except that the revenue per capita is not the same there. Thank you, that's really clear. Thank you very much. Let's hope that this situation improves quickly because with companies, I know that the situation was tense in the coming months for several companies. Well, let's hope that the situation improves. There were improvements over the past few weeks, but let's hope that this continues. Thank you.

We now have a question from Laurent Dor.

Laurent Dor has a question over to you.

Yes. Hello, Bruno.

Hello, Bruno. I have four questions, but they're really quick.

Your comment.

On the M&As, you had a few M&A projects and you said that you've had red lights. Why? Because the outlook for these companies has changed or the context has changed or do you realize that there are no good deals to catch and that you think that given the current context, it's going to be difficult to close deals? Well, this is a good question. For the opportunities that we had and that reached the end of the due diligence process, the main reason why we didn't go for them is that there were two reasons. Either because the content of the offer itself and the positioning of the company based on what was described was not exactly aligned. And we decided to not move forward.

That's one reason. Or we realized that these companies had a positioning that was acceptable or at least aligned with what we wanted. but that the prices, the price for the seller was not adjusted. So you had companies that would

telling us that the company was profitable and it wasn't as profitable as expected at the end of the due diligence process. What we want is the gross margin and the quality of the gross margin. We need to look at the contract, the margin per project. When you have gross margins, the gross margins are when they're poor quality because the prices are too low or because they're not managing their project well enough. We can't say, well, we'll pay 12% EBIT when the truth is that it's actually a 4%. So the content and the price is the misalignment between the two that led to red lights. The other reason is that there were some deals where the seller, the profitability level was pretty much aligned, but the seller were excited expecting multiples between 13 and 17, and that's nonsense. Do you still have potential deals in India, or isn't there anything there either? What we have right now are small potential deals, small deals in the telecommunication sector, life science.

Yes.

We have one that's slightly bigger. We're talking about thousands of people in semiconductors. We're currently negotiating an LOI. We have a few in China in the automotive sector. We don't really want to invest in China again for... political reasons, but given the current situation in the automotive sector, we don't want to take risks. We have one deal in France, a potential deal that we're looking into. One in Spain. We do have a pipeline. And also one in the US. We have a pipeline of deals that we're looking at discussing and negotiating as always but which ones will be closed in 2025 is hard to tell one question the slowdown is also due to the fact that you have assuring trends are there clients that are trying to negotiate their prices as well

Is the price environment stabilized?

Not really, no. Because we're looking at work packages here. And the truth is that our clients tend to consider the price as a whole.

And the price is based on each bidder.

comes up with a price based on the size of the team that they want to deploy, the skills that they want, and the wage. So there is clearly a negotiation on price. I can't say otherwise, but it's not as transparent as for technical assistance, because you have clear grids, even though you have different skills. but every bidder creates its own offer.

Then you have the AI issue.

A lot of clients are asking us whether we're going to use AI, and if so, to change our price based on that. We see that a lot in call for tenders, more and more. Not in all, but there are a good number of them.

And in Germany, The design and material market is clearly down.

The price negotiations, especially in the automotive sector, BMW, for instance, we have a significant decline. Does that mean you're able to keep your gross margin?

Thanks to regulated wages.

Well, based on the end of March analysis globally, the gross margin per project remains resilient. thanks to the work package activity. The global growth margin, because we need to structure the work package, but we have technical costs as well. It's slightly different. But this increases a little bit, but the intrinsic margin for our projects is resilient. Two last points. I'll go over this really quickly. There's two geographies in countries where we have significant declines. Does that mean you need to have redundancy plans or could we expect higher restructuring costs this year? Higher? I don't know, but there are clearly two areas, two geographies where we'll have a restructuring plan. Germany and Scandinavia. But we're not talking about large sums of money, large amounts of money. Last comment on the banking sector. This was Nicolas' question. It's true that it's one of the few verticals where there's a little bit of hope. What can explain the situation in France compared to the rest of Europe or even the US? The perception that we have of it is that we may not be the best position to tug. Because IT in the banking sector, we know that there are a lot of competitors. There are people that are probably more representative than we are. But French banks continue to have very tight budgets because they still have IT budgets. reduction targets and who's paying the price of that is the service providers that are working on product management and product design. Because over the past three years, I've seen this through the IT cost evolution of the group. Part of the value capture by editors with the different tools

are now SaaS.

And this generates an inflation of IT costs, which are already quite high.

And large publishers, Microsoft, but not only VMware, et cetera, et cetera, have increased their prices

A lot. More than 50% price increases, if not more. And that's something that has to be done by information system departments. So what they do is that clients say, well, we're going to postpone our projects. project because the iet costs have increased significantly over the past three years there was a gartner study that's really interesting on this that talks about the iet costs that have skyrocketed in the inter industry and tertiary sectors thank you bruno that was very clean

We have a question from a telephone auditor. I ask you to identify yourself before asking your question.

It's up to you. Good evening, Bruno.

Good evening, Bruno. I have several questions, if I may. I'm going to try to have a positive mindset. There are some companies that have indeed observed, like you did, a delay in decision-making at the end of March and a real wait-and-see attitude from our clients, and yet they noticed that from the beginning of April, following the Liberation Day, they noticed that the business flow was back to business as usual. Well, of course, the tariffs had had an impact, but this wait-and-see attitude of the end of March seemed to be over at the beginning of April. Have you observed this as well in your KPI? Not at all. Not at all. Second point, there were positive comments on the massive investment plan in Germany. So, of course, not on all fronts, but they talked about significant amounts. Do you think that this will have an impact on the recovery of our business? This is an excellent question that we asked to the... of Germany, because indeed, massive amounts are going to be invested. We're not really present in the defense sector in Germany, aside from Airbus Defense and Space, of course. There are other accounts, such as Impulse Marine Metal, accounts that are exposed.

So we work with them a little bit.

So these accounts have been strengthened by Alten and the things are not changing in a significant way and the increase in business because we see such an increase is more small projects that are managing time and material, but it's not a significant worth package as we have with Thales, Safran, and all that. So now we need to look at how to penetrate these accounts. If it's their strategy to outsource, and we don't know that yet, because we want to generate turnover, but we also want margins, and sometimes it's difficult in Germany. So that's for defense, but what about the 500 billion invested in infrastructure, transport, and the energy transition? You don't have clients that are... going to benefit from these investments? We have a few, but honestly, they're quite small. It's part of a commercial strategy that needs to be implemented.

Third question.

In October, you were quite cautious because you had made many theories and you had a lot of buffers for the results in the first quarter if you look at q2 do you do you have the same buffers in place in light of what took place in march and can you give us figures for these buffers We've asked all bosses and their financial directors not to have a commercial approach but rather to have an objective one, an objective approach of the situation and to only insist on... on the projects that we will win. But we're the 20th of April and the end of Q2 is in two months. So I don't hope, I don't think that it will be too far from the guidance that I gave you. But every month, Bruno, you have a significant part of your business, not a significant part, but a small part of your business that is linked to new business, no?

Yes, of course.

The decision-making cycle is really short, so visibility on our projects, it's difficult. We have many engineers.

We also have projects in the pipe.

They know their clients.

If your question is... Did we take into account potential project wins that we would have?

Yes, of course, because otherwise we cannot do anything. So what's the run rate versus project gains? I don't know exactly because I don't delve into the details of what each company does. And my very last question keeps coming back, but I'll ask it again anyway. A big deal was announced with a European OEM, Tata announced it. It might be an automobile supplier, but I think it's an OEM. A 15 million euro deal on some vehicles and companies. Is it the type of deal on which you... might position yourself?

Or are these things that you don't necessarily look at?

In Germany, they don't position themselves on such big deals so far.

We position ourselves on smaller deals.

And why not?

Because you have the delivery capacity in India, such big projects. I think that, in light of the size of the group, it's not that big. It's a big project for Germany, but in light of the size of the group. Why don't you go to these deals? around the reorganization of the of software development of the infotainment part of um most of these projects when there are big projects like this uh indians are the ones who win them And there are significant risks, very significant risks. And there are also ramp-up costs. So I think that such projects, the economic equation of such big groups, such big projects for a group, it's too risky.

Yes. On les assume sur des projets de taille un peu plus modeste, alors 15, 20 millions d'euros.

For 15, 20 million years, we would do it.

We've done it in Germany for Telecommunica, for instance.

But it's such a big project with such a big ramp-up cost and execution cost. We've decided not to go there yet. And just to continue on this question, Bertrand Laguerre or others, You started a partnership, but it's not to address this type of project, is it?

No, we have a small JV with Renault, with Bertrand, but it's not for that.

If we were to find alliances for such projects, we would go and look to China today. But I thought that your offshore factory in India, the teams you have there, were sufficiently significant to go and get this type of project. Once again, it's not a matter of size. It's a matter of economic risk on these projects. All right. That's very clear. Thank you. You're welcome. I received a written question from Alexandre that is asking me for the France and international occupation rates. It's a rate that we don't communicate, not because we don't want to, but because we follow them per company and per country, geography, and not only for France and abroad. What I can tell you is that the occupation rate in France is above the average of the group.

Group average.

So it's more than 90% internationally speaking. Slightly above 90%.

There are no more questions.

So if there are no more questions, well, thank you all for taking part in this call regarding P1. I hope I've answered all your questions. I'm available. Shall you have any more questions that you might have forgotten?

Until 8 p.m.

tonight. I wish you all a good evening and see you soon. Bye.