Last Results of Altran before Aricent: Moves its Adj. EBIT Margin above 10%
Altran released its last financial results before the integration of Aricent. The company had in 2017 revenues of EUR 2,282m, up 10%, and up 4.8% at CC/CS.
Its adjusted EBIT margin accounted for 10.8% of revenues, its highest margin ever. And for the first time in many many years, if not ever, Altran matched the performance of Alten, with a 8.9% EBIT margin, helped however by a 40 bps gain in provision reversal.
Net debt was EUR 351m, impacted by a reduction in factoring, representing EUR 79m in additional debt.
Altran provided some light on its operations by geography:
- France, now almost a EUR 1bn business is seeing solid traction (+6.8% at CC/CS in full-year 2017) thanks to large accounts and larger projects. France is moving out gradually of the body shopping business and already has 18 local expertise centers. Altran was keen to highlight its domestic operations remain very heathy in spite of a “soft” Q4 impacted by the end of a BOT contract with a large automotive OEM that involved 200 to 300 engineers
- Germany/Austria, its second largest geography, with EUR 275m in revenues, is back to solid growth (+5.9% at CC/CS). Altran is now winning on the back of offshore-based contracts with automotive OEMs against major incumbents. the downside is that Germany is however late in its profitability recovery plan by one year. We understand that Germany in 2017 was only close to operational break-even point
- With the sale of its energy business, US is back to being a small geography (with restated revenues of EUR 83m). Its Foliage business (PES for the medical device industry) was down after the completion in 2017 of a EUR 18m contract, and by the loss of two major clients by its Pohika (software product development). In total, US was down by 6.9% at CC/CS.
Aricent was the major topic of these 2017 results, with Altran insisting on the timely nature of this acquisition, expecting telcos to resume their R&D investments, notably with SDN and in the mid-term by 5G. Altran also insisted, very rightly we think, on the strength of having now a sizeable product design unit, with Frog.
Altran provided some light on its integration strategy, with Aricent taking over the operations of Altran (apart from Synapse now integrated in Cambridge Consultants). Aricent will take over Altran in semiconductors, design, telecom, and software product engineering during 2018-19. A priority for Altran during this period will be to cross-sell the capabilities of Aricent in Europe, with Frog as a priority.
Finally, from a financial perspective, the priority of Altran will be net debt reduction, targeting a net debt to EBITDA ratio of 2.5 by 2020, down from 3.25, once the acquisition is closed. Altran is aiming to reach ASAP a ratio of 1.5, a level it believe is right for the company. Large M&As for the next three to four years are therefore not part of the strategy.