Bertrandt Underperforms the Market in Q1.
Bertrandt’s revenues in Q2 FY18 (corresponding to Q1 2018) were EUR 252m, up slightly by 0.2%. The performance of Bertrandt was impacted by one lesser working day. Revenues related to Volkswagen were EUR 78m, up 4.0%. This is an improvement after the 15% decline in FY17. External revenues were down 1.5% to EUR 174m.
Bertrandt’s performance was even across business units. Electrical systems and electronics, which is the digital part of the firm, was flat (-0.4%) to EUR 53m. Digital engineering, which is the largest business unit of the firm, and comprises of automotive design activities, was up 1.1% to EUR 149m.
Bertrandt’s EBIT margin was 7.3% unchanged yoy (Q2 FY17: 7.2%).
During its investor day, held on the same day as its Q2 FY18 results announcement, Bertrand reiterated its view that its revenue growth is plateau-ing currently, due to market conditions, and that growth will accelerate eventually. There is no denying that the German automotive ER&D market has flattened in the past few years, with the AUG legislation impact, price pressure, and signs of rising offshoring acceptance. The trouble is that the financial performance of Bertrandt’s competitors show that growth is accelerating. Akka’s revenues in Germany were up 7.2% at CC/CS (to EUR 119m). EDAG was up 4.8% at CS (our estimate) to EUR 194m. Altran was up 7.9% at CC/CS to EUR 70m. Of all the listed major ER&D service vendors, only Alten had a similar performance as Bertrandt with a slight 0.2% revenue decline in spite of a 2% growth among its automotive clients.
More and more the flat growth of Bertrandt seems it is company-specific rather than market-related. This is bad news.