Altran Reassures Investors with its Organic Growth in Q3. Stock up 15%
Altran had a yoy CC/CS revenue growth of +10.4% in Q3 2018, with revenues reaching EUR 731m (USD 933m). Growth was broad-based with all major business units back to solid growth.
As announced, France, still Altran’s largest geography was up 8.4% at CC/CS in Q3 thanks to a successful recruitment strategy initiated in Q2.
Germany/Austria zone was up an impressive 20.8% CC/CS yoy, thanks to a better utilization rate, two contracts having reached up peak level in Q3, and a limited holiday effect. The impressive growth will slow down in Q4, with Altran targeting 8% to 10% in Q4 onwards. Altran is focusing on margins and targets sequential 150 bps improvement each semester.
North America was also impressive in Altran’s non-Aricent units: growth reached 24.3% thanks to software product engineering and semiconductor engineering, and good in all units. Aricent was up 2% at CC/CS, although Altran’s management acknowledged it would suffer in Q4 from a demanding comparison basis (with one-off software and IP licenses in Q4 2017).
Aricent remains the priority of Altran, with, in the short-term, a priority on restoring margins, which the company is hoping to achieve by year-end. Altran has laid off 728 FTEs, mostly in Aricent’s telecom IP business where the forgery was found. Q4 will be a difficult month with a demanding comparison basis: Aricent had sold several IP licenses in Q4 2017.
Altran is changing Aricent IP’s business away from licenses towards subscriptions, still hopes to get the telecom business back to growth by H1 2019, wants to benefit from the current investment in 5G and software-defined networks in the US. Outside of telecom engineering, other Aricent units are doing well: semiconductor and software product engineering businesses are driving growth. Frog was flat in Q3 and is accelerating. Altran is also working on revenue synergies, with €143m in TCV won so far and €120m in its pipeline.
Investors reacted positively to the news: Altran’s stock was up 15%. The stock recovery of Altran is still very much as WIP. Its stock still trades at a third less than the forgery was announced, and its market cap is only EUR 2bn, almost EUR 1bn below that of Alten.