UPDATED: Altran Finds $10m in Forged PO in Aricent. Stock Down 28%
By now, everybody probably knows that Altran’s market cap was down 28% today after the company discovered late June, $10m in forged purchase orders in the accounts of Aricent (before its acquisition in Q1 2018). The forged purchase order is related to the sale of an IP and was therefore “pure profit.”
Altran has issued a profit warning and is now expecting the operating margin of Aricent to 15.6% (on LTM revenues to June of $675m), from 18.3% (LTM to September 2017). As a result, Altran has launched an internal investigation to make sure this fraud was a one-off, and will be reducing the cost base of Aricent to bring back to it previous profitability level.
Altran’s stock was back today to its early 2016-levels, to EUR 8.6 per share, valuing the company to EUR 2.2bn, well below that of Alten: EUR 2.9bn. The sharp stock market response to the $10m forgery probably reflects:
- Fear the forgery is more widespread than this one-off suggests
- Misalignment between the $10m forgery, and the impact on the $18m operating profits (from 18.3% down to 15.6%). In a later conference call, Altran’s management highlighted the extra $8m cost was related to administrative expenses related to the fraud
- Questioning Altran’s decision to reduce cost at Aricent to restore its profitability, rather than keeping on investing in its development
- Uncertainty related to the time the forgery was found (late June), and the announcement of the High Road strategic plan (June 28, 2016).
Altran reiterated that the Aricent acquisition is well-grounded and will put it well ahead of competitors. And to be honest, this probably is right.
The company has now entered a time of uncertainty, from a stock market perspective. The best thing Altran can do is reinsure investors with a steady performance, and that the Aricent acquisition is not impacting operations. We will have to wait until September 6. This is going to be a long summer!