Altran in Q3 2019: North America Soft Despite Reassuring Telecom Business

/ November 4, 2019/ Altran, Financials, France, US

Altran’s CC/CS revenue growth in Q3 2019 reached +6.0%, to EUR 779m. The company slowed down somewhat from Q1: +8.1%, and Q2: +6.8%, despite the improvement in its operations in North America.

North America accelerated slightly its growth in Q3 (+2.6%, vs. 1.8% in Q2), thanks to improved performance in its telecom engineering business and Frog, the product design unit, and continued healthy activity in its Altran’s product engineering unit.
North America suffered, however, from slightly declining revenues from the IP partnership with IBM and softness in the semiconductor sector. Altran has taken action with IBM to strengthen IBM software sales and therefore drive software product revenues. In the semiconductor sector, Altran is transitioning a significant relationship from T&M from India-based delivery until Q4. Semiconductor revenues should move into positive growth territory in Q1 2020.

Europe continued to grow steadily, reaching +7.2% at CC/CS (Q1: 7.7%; Q2: 8.4%) thanks to accelerating momentum in West Europe (France, Belux, Northern Africa), which was up 7.4% to EUR 266m. France is accelerating thanks to a robust net hiring performance.
Central Europe moved into decline: Altran suffered in Germany from price pressure in the automotive sector and has been promoting an offshore-based delivery to balance price pressure, although adoption is taking time. In the meantime, Altran favored improving its margins over revenue growth.
Finally, North Europe has also slowed down (+4.6% at CC/CS in Q3) with Brexit delaying decision-making in its Cambridge Consultants unit. Altran expects the market to regain momentum once Brexit-uncertainty is over.

We expect Altran to perform at similar CC/CS growth levels in the coming quarters. In North America, the company is back to normal, with Aricent’s forgery being an issue of the past. However, based on the comments of various competitors, the adoption of 5G will be more gradual than we expected and will contribute modestly to growth. Therefore, we expect Altran to push sales in its software product engineering business, where it has a solid value proposition, and in frog, its product design unit.
Outside of North America, Altran is demonstrating its geographical balance brings mid- to -high-single-digit CC/CS growth despite soft markets in Germany, UK, and the Netherlands. This is reassuring.

Share this Post