Assystem guides for 10% revenue growth in 2019
Assystem’s 2018 earnings were in line with its guidance. The company already had communicated its revenue performance, with a disappointing H1 (+0.8% at CC/CS) and a very good H2 (+13.2%).
The profitability of Assystem followed the same pattern with an adjusted EBIT margin of 4.3% in H1 reaching 7.3% in H2. Over the full year, its EBIT margin was down 60 bps, impacted by multiple factors: poor performance of the newly-created Assystem Care, and two effects of the GPS sale: additional recruitment-related communication expenses, and high overheads.
Assystem highlights that Assystem Care is back on track, is gradually lowering its overheads and believes its recruitment activity should be easier now that Assystem Technologies has rebranded as Expleo.
The company has guided the market with a 10% revenue growth for 2019 (all organic) with nuclear engineering still fueling growth (+20.5% at CC/CS in 2018).
The company has momentum with EDF in France and is starting to see the benefits of its internationalization with ENEC in the UAE (with a recent JV crated with Nama Development), the growing KA.CARE contract in KSA, and new Rosatom-related projects in Turkey and Egypt. Assystem is eyeing the Indian nuclear engineering opportunity and has set up a JV with AXISCADES in anticipation of the six EPR nuclear plants EDF is currently negotiating with the Indian government. The JV will largely be around sourcing nuclear engineers and training them. Also, Assystem is looking to work with AXISCADES on offshoring some work to India, as a by-side.
Outside of nuclear, ET&I should do well thanks to Assystem Care, Radicon in KSA, and new work in its transportation unit. MPH, the staffing business, should have flat sales in 2019.
Assystem is targeting an adjusted EBIT margin of at least 6.6%, with H1 benefitting from a favorable comparison basis. Assystem continues to have a relatively low profitability level and believes its standard profitability should be about 7%.
Where Assystem tends to do well in financial terms is in FCF generation. The company generated FCF in 2018 representing 9.9% of revenues (Altran: 3.3% excluding one-offs related to Aricent; Alten: 3.6%) thanks to one-offs. The company is expecting FCF to account for 6% of revenues over 2018-2019, which still shows strong cash generation. As a result, Assystem’s net debt should back to zero at the end of 2019 (excluding M&As).