Altran performs well in Q1 2019 despite the cyber-security incident and Aricent

/ April 26, 2019/ Altran, Aricent, Financials, France, US

Altran achieved in Q1 2019 a CC/CS growth yoy of 8.1% despite the impact of the decline in revenues of Aricent (-2% at CC/CS) and of its cyber-attack (impacting the revenue growth of Altran by 200 bps). Excluding these two items, we estimate that Altran would have grown organically by approximately 11% at CC/CS yoy, roughly in line with the performance of Alten in Q1 (+12.5%).

Altran’s performance by geography was in line with Q4 2018:

  • Altran’s largest country, France, was up by 4.0% at CC/CS yoy. Excluding the cyber attack impact, we estimate its growth in the country to ~+9%
  • Americas was up 13.0% at CC/CS thanks to momentum in its software product engineering business
  • Germany (+12.4%) was driven by large contracts while the UK (+23.1%) benefited from its mix of services despite the Brexit effect
  • Altran continued to suffer in Nordics (-11.4%), impacted by the ramp down of one large client. The company believes fixing Nordics will take time as it does not have critical mass in the region. Altran also suffered in the Netherlands (-7.3%) but is more positive on the country, with recent new executives in place.

Altran’s cyber-attack is now past, and the company highlighted that the lost revenues will not be recovered. However, thanks to insurance policies, the cyber-attack will not have any impact on its operating margin.

Altran confirmed it will get Aricent back to growth by Q2. Communication, the largest business of Aricent is still expected to resume growth in 2019, thanks to investments in network virtualization and also by 5G, across service providers and equipment manufacturers. Altran is also planning to resume growth for its Frog design/style business and semi-conductors in Q2.

Meanwhile, the company highlighted it has completed the integration of Aricent, merged the semiconductor and software product engineering businesses in the US, and transferred its Europe design activities to Frog.

In Europe, Altran completed its reorganization: the company now operates around five clusters: West Europe, South East Europe, Iberia, Central Europe, and North Europe. With this new structure, Altran intends to end some of the financial volatility it used to suffer in some of these geographies. The cluster structure also aims to reduce SG&A costs in the country by centralizing functions. The company plans in the mid-term to offshore several back-office services, e.g., procurement, legal, and IT.

Altran now enters a new area, where Aricent will resume revenue growth and its 2018 difficulties are now solved. One must acknowledge the quality of the management of the firm for integrating Aricent, navigating stock exchange turmoil, and managing its cyber attack incident. Investors are recognizing the turn around: Altran’s market cap is now almost EUR 3bn and its stock up is up by 63% since January 1.

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